By SD Contributor SRSrocco:

When there was extreme volatility due to the huge inflation in the 1980′s, Middle East Oil Production fell off a cliff.  However, you will notice that during all the BIG DIPS in oil production, the Middle East Consumption of Oil (RED), did not MISS A LICK… did it?  Even though the rest of the world cut back on oil use, the Middle East did not.

Saudi Arabia is the 6th LARGEST OIL CONSUMER ON THE PLANET NOW!
All oil producers PEAK… just like Indonesia… who used to be a apart of OPEC.

THE FOLLOWING CHART SAYS IT ALL…

2013 Gold Eagles As Low As $74.99 Over Spot At SDBullion.com!

2013 Gold Eagle

This chart was in my 2013 SilverSeek Conference Presentation.  The Orange area is Middle East Oil Production, and the Red area is their own consumption.  You will notice a few interesting things.

First…. when there was extreme volatility due to the huge inflation in the 1980′s, Middle East Oil Production fell off a cliff.  However, you will notice that during all the BIG DIPS in oil production, the Middle East Consumption of Oil (RED), did not MISS A LICK… did it?  Even though the rest of the world cut back on oil use, the Middle East did not.

Saudi Arabia is the 6th LARGEST OIL CONSUMER ON THE PLANET NOW…LOL.

All oil producers PEAK… just like Indonesia… who used to be a apart of OPEC:

Second… even though MSM is stating that the Middle East has spare production that could come online, there is growing evidence that this is just BS.  The world is suffering a 5% annual decline rate in oil production.  That means they have to add 3-3.5 million barrels a day to stay FLAT.

Here we can see in the following chart just how much CONVENTIONAL CRUDE has peaked since 2005….. EVEN WITH NEW OIL PROJECTS:

Again, there have been new oil projects that have come online… but all they have done is to MASK the DECLINE RATE.  Even with a 3 times higher price in Brent Crude, the world has not been able to bring on much more oil to the market.

Let me tell you…. SHALE OIL from the BAKKEN that suffers a 40% ANNUAL DECLINE RATE is not going to help the world that is already witnessing a 5% annual decline rate.

I am simply amazed at the lack of INTELLIGENCE when it comes to these simple concepts in MSM.

Unconventional crude such as TAR SANDS & SHALE OIL will add more supply but a huge cost in price and EROI.

 

SD Bullion

  1. Being in the industry to a degree, I can tell you that for the last 10 years, I have always perceived that saudis reserves are an open joke. Oil is certainly going to be a hell of alot more expensive in the future, but short term I feel that is could easily belly out for a time.
     
    In other news, I’m thrilled to see hybrid diesel / natural gas engines starting to roll out.

  2. What will you call this?  Saudi Arabia’s  Potemkin Petroleum Production?
      SA has some real problems from a financial standpoint too. The social infrastructure is warped.  The cost to feed, house and support the millions of Saudi citizens is going to  go MUCH higher when the food costs rocket.  Saudi’s lack of water supplies means it will have to import 100% of its wheat in a couple of years.  The price of wheat and corn will go off the charts this year due to the droughts and low production of grains in the US, Canada and Australia.  How much will we be able to export to those countries who have serious food production insufficiencies?
      Ethanol will consume maybe as much at 40% of the corn production and its EROI is negative. 
    There is a post on economiccollapseblog about the growing shortage of clean water.  It’s pretty sobering and will relate to all oil producers and their ability to feed their hungry populations. Even the US is running low on fresh potable water.
     OPEC oil production will be inwardly directed to pay for the food and social costs that will increase by double digits this year and into the near future.  Exported oil may become a bit of a luxury for these ‘third world’ OPEC countries. They may need most of their production for themselves.

    • Don’t forget about the tension between Iran and Israel and Saudi Arabia is close to these two countries so it could be affected. Iran can also close the strait of Hormuz which is the path for the majority of all oil productions.

  3. SRSrocco
     
    I have worked in Saudi Arabia [Expat] for over 20 years and my observations on the ground confirm you are 100% correct. The population in my time here has EXPLODED and I would estimate without looking for official statistics it must have at least doubled if not trebled in that time-frame.  To such an extent that I even avoid driving on the roads after dark these days as the standard of road safety and number of resulting RTAs is truly shocking. It’s bad enough in broad daylight, at night you are just asking for it.
     
    The subsidised cost of fuel over here is a petrol heads dream. A US gallon of Premium is equivalent to approx 60 cents. A US gallon of Diesel…30 cents. Obviously being an exclusively Muslim population, large families are encouraged. Domestic consumption will continue to accelerate until something gives. The Export Land Model is a ticking time bomb and SA will find itself stuck between a rock and a hard place eventually. As product available for export decreases due to increasing domestic demand, less revenue will be flowing into the Government coffers. Yet to keep the population pacified with cheap fuel they need the revenues from exports. I can see the next 20 years being very very different for the Kingdom and bare no resemblance to the last 20.

  4. What this also means is that within the next five to ten years, it will not be surprising to see a not-so-organic uprising in Saudi Arabia leading to the US invading S.A.

    Dick Cheney’s energy task force reportedly documented this well over a decade ago. They were well aware of the impact of the Export Land Model.

    Steve, what year did you compute as the flip year to net importer for S.A.?  Just curious for context…

  5. There is no such thing as “natural peak oil”. It is a staged thing. It will be a shift to natural gas that can come from anywhere. Nevertheless, we cannot influence this and we just have to set our investment focus beyond stacking. The middle east will close down and apart from some countries centered around Israel – even more to the east will be in such ruined state that just the building up will provide economic growth for the next I don’t know how many years. This will also stop islam and population growth (it will decline as a matter of fact) as they will be focussed on money and personal gain like in the western and communistic world since the 60s.
    So the basic question is: where to swap our stacks to?

    • Personally I have a couple strategies…
       
      1. Wait for the silver to gold ratio to tighten closer or even reach 1:1 and trade in some silver for gold so my holdings would be closer to 50/50
       
      2. Wait for either a deflationary or inflationary collapse and buy up undervalued assets. Purchasing power is the name of the game with either.
       
      3. If it’s more of a slow burn decade long stagnant collapse then I would hope there is a gradual bull run in PM’s, enough to buy more and more foreclosed real estate or buying items from people that will sell anything to stay liquid in fiat dollars. Think farm equipment, PM’s, Farmland, mineral rights etc. Anything that is real and outside the realm of 1′s and 0′s.

      That being said some of my Ag and Au will never be sold or traded because I personally think one should always hold some of both no matter what the economic situation is.

    • I personally will keep my stacks and save them just like money. I’ll use them to purchase goods and services after a collapse. For example in Utah, gold and silver are now legal tender so people can use these metals to purchase goods and services after the SHTF.

  6. Real estate is dropping, about to collapse, world-wide. We already have low interest rates, just wait until they eventually go up a few moderate ticks. With gas getting scarse and expensive, PM undoubtedly eventually following, I am hoping the bottom in real estate/land prices will pretty much coincide with a peak in silver. That’ll be one vineyard in a country that also has a real skiable winter, haha! Italy (going down), Eastern Europe, surely some country should have a hugely low land price/currency when my silver gets too hot too handle?

    • It is always like that. Although you can still invest in countries like Poland (and I will be in the next few years in some real estate), the largest gains will be in the new countries you don’t have any feeling with as a private investor like in the past China and Eastern Europe. Next will be the middle east. I know they will build it up, but the desert sun is too hot for me. So again, find your way around their. Move from family and comfort. Your holiday will be back to western civilized world. I am looking for a remote control investment if this is possible,

    • Precious metals will of course follow the gasoline’s price because gas is used to mine metals. I have no real estate products so I don’t have much of a worry for the dropping of house prices.

  7. Actually, XCS, it is a myth that rising interest rates will be the end of our economies.  There have been many years of reasonably good economic activity and growth with an average interest rate of around 4%.  Interest rates could rise significantly and still not reach this level.  What is probably worse today is the fact that we are training our economies to think that uber low interest rates are REQUIRED for our economies to function.  The real truth of it is that our economies will operate just fine in a 4-5% interest rate world.  They might even operate better than they do now because: 1) there will not be nearly as much mis-allocation of capital because it is so incredibly cheap.  With ultra-cheap money, why NOT gamble with it, etc.; and 2) savers will get a reasonable return on their money for a change and that will encourage saving.  Since saving is the bedrock of any thriving economy, capital formation will increase greatly and this money will be loaned into the economy to create all kinds of economic activity.  What will not be fine, of course, will be governments that are addicted to profligate spending, as if there is no other way possible to operate.  Unlike what the politicians all say, government is not the be-all and end-all of our lives.  If it is forced, kicking, screaming, and leaving fingernail drag marks all the way to become financially responsible, that will be a VERY good thing.  Painful at first, perhaps, but definitely a huge improvement over time.

  8. The future will definitely be an interesting situation.  As Middle East oil peters out and millions of hungry people there need food, the bread basket that is the USA will be in an interesting position.  Yes, the oil producers have had their day in the sun when they could put the oil consumers over a barrel but the time is approaching when they will be put over a sack of wheat, corn, rice, or soybeans.  Oil is a very useful commodity, no doubt, but not as useful as food.  It will be interesting to see if the US can come up with an efficient way to power our farm equipment in an era of minimal oil production.  If we can, US farmers will be in an excellent financial position.

    • Oil is the most used commodity in the world and then in second place, it is silver. That’s what I’ve heard from an article before. All food producing countries need to find an alternative source beside oil since oil is now used to produce more food to feed our growing population.

  9. If the oil productions are falling down right now, then the oil producers need to find another resource. I’ve heard that the northern part of Canada has a lot of oil buried deep under the ice. It is estimated that the oil reserve is the equivalent of Saudi Arabia’s reserve. I wouldn’t be surprised if the USA starts exploiting Canada’s oil.

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