By Hussein Shobokshi
WHEN a party seeks to justify a point of view emotionally and far from objectivity, the argument enters into an issue that is beyond the main subject.
This is what is happening today in “rejecting the idea” of the proposed sale of a stake in Saudi Aramco.
The opposing group is of an exaggerated view that the sale of shares of Saudi Aramco to others is akin to selling one’s honor to someone and so on. So I will make an attempt here favoring the sale of stake in Aramco and I am fully aware that I may be walking on a minefield!
Perhaps the most important and very serious challenge facing Saudi Arabia and its economy today is that the oil is depleted economically before it is drained naturally, just like what it is happening with coal, which is still produced, exported and in use but ineffective on the map of the global economy.
The value of oil is reduced and therefore its revenues will continue to decline. Accordingly, the company that produces it (in this case Saudi Aramco) will lose its financial value over a period of time. For example, if its value is 100 today, it will be at 90 tomorrow or 80 the day after tomorrow. The cause of this decline is evident and nobody can deny or ignore it and therefore there is a need to clarify this to those opposing the idea of the stake sale.
The quantity of oil available in the market today is huge but the supply is more than demand. This trend is likely to continue in light of the large number of discoveries of new oil fields as well as due to availability of shale gas from the United States (America does not possess large quantity of shale gas. But China, Argentina, Mauritania, Morocco and Jordan have abundant quantity of it but they do not have the technology to extract it and therefore this is just a time factor nothing more).
Now the continuous focus is toward development of alternative energy from air, shale gas and solar which are more environmental friendly and these are sources of energy whose efficiency is getting improved through research and experience and thus there is a decrease in the cost of production. Morocco alone plans to have 50 percent of its energy requirement from air within a few years. What Morocco has planned also applies to other countries around the world that have set similar goals.
There is the phenomenon of Edmond Musk, founder of Tesla electric cars, an icon in the world of alternative energy, just as Steve Jobs was in the world of communications. It will be a great revolution when car models operating with alternative energy and with high efficiency are successfully completed and widely sold in the market that will obviously lead to very low consumption of the traditional oil. Perhaps the same type of alternative energy will be applied for development of aircraft and cities. Thus, one can imagine the effect on the price of traditional oil and its consumption in future.
Today, all major international car manufacturers have models similar to Tesla because they are convinced that the technology is not accidental, temporary or transient, but it is there to stay. All this has become a reality and has influenced the situation in the world of oil market.
There was a time when the price of oil would jump to record high with any talk or signs of war in the region. It is no longer so. The situation has changed drastically. Today even though the region is engulfed in wars but the price of oil has not been affected at all.
Sale of a stake in Aramco is a wake-up call to reality and there is a real need to cut the umbilical cord with oil and a serious transformation of an economy that is not dependent on oil because it has created an abnormal economic state of affairs and this situation is unnatural and unsustainable.
Selling a stake in Aramco means it will have a respectable value today and the proceeds of it can be invested into non-oil resources which is a better solution then getting carried away with emotions and convulsions.
Today Aramco is a valuable company and more importantly it has a better value than in the future. This is an important fact no matter how decorative one tries to paint the picture.
