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Title : This Might Be The Graph Of The Year -- July 29, 2018
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This Might Be The Graph Of The Year -- July 29, 2018

Earlier I posted this note but it needs to have its own stand-alone post. This is what got my attention -- in the note below I highlight the challenges Russia must be having -- in the last ten years Russia has increased production by only 500,000 bbls -- just a half-million bopd -- North Dakota has practically matched Russia on growth. I grew up thinking oil in Siberia was a never-ending story. Hmmm.

But now, look at this, Saudi Arabia. Look at GDP growth year-over-over for Saudi Arabia.

It's hard to read the graph but it appears that Saudi has recorded a negative budget three years in a row, something never seen before except perhaps in the early 1990s but the budget deficit then was near the break-even mark, followed by spectacular revenue years from 2003 to 2011.

By the way, this graph seems better than what I generally see -- now I know why -- it came from ZeroHedge.

More from the article and ZeroHedge:

It wouldn't be the first time: two years ago, Saudi Arabia turned to the international debt markets for the first and has since raised at least $40 billion in sovereign debt to fuel spending. In doing so, it has increasing its debt to GDP ratio to 19 percent, but in comparison to the rest of the world's insolvent nations, that ratio makes the Saudis look outright frugal. Saudi Arabia has set itself a limit to clear its fiscal deficit by 2023, although once you pop (your bond market cherry), you don't stop. With or without Aramco, Riyadh is expected to raise billions more in debt this year.

The same goes for Aramco, which -for now - has only a modest debt load compared to other global oil giants, such as Exxon Mobil and Royal Dutch Shell, making it relatively easy for the Saudi firm to borrow cheaply, even though Aramco doesn’t disclose financial results and just like China, nobody really has any clue what is on the company's books. In fact, the risk of opening itself up is why Aramco decided against the IPO in the first place.

I don't know about "you," the reader, but this graphic is absolutely stunning. With all the headwinds -- terrorism; Yemen; Iran; US shale; Salman's Vision 2030; outlay for SABIC -- it's hard to believe Saudi can report a balanced budget any time soon. Remember, last year, Saudi said they needed $70-oil this year.  "Everyone" talks their book which suggests to me Saudi really needs  $80-oil or better.

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The Gap Grows

Peak oil? How US shale flipped the script in global oil markets. Over at oilprice.com again. Again, I've archived the entire piece in case the post disappears. Again, this article links to the 2018 global energy review by BP.

But the future played out differently than it seemed it would in the summer of 2008. Unbeknownst to most people, oil producers were experimenting with a marriage between two established oil drilling technologies — horizontal drilling and hydraulic fracturing.

The success of this marriage would unlock oil in tight oil and shale oil deposits that had previously been too expensive to recover, and would result in one of the greatest oil booms the world had ever seen. In fact, the “fracking revolution” caused U.S. oil production to turn upward in 2009, and then rise over the next seven years at the fastest rate in U.S. history.

While it is still true that OPEC produced 42.6 percent of the world’s oil in 2017, the majority of new oil production since 2008 has come from the U.S.

As I read that, my thoughts turned to the comments from two readers over at The WSJ:

The shale boys saved Obama from a total economic meltdown - now they shift into high gear. Amazing what creative people combined with private property can do. Meanwhile our "carbon footprint" keeps declining thanks to natural gas and not the government.

The shale drilling did save Obama from a complete economic meltdown - but he spent much of his 8 years fighting the pipelines to deliver the oil, he kept the USA from exporting LNG for 7 out of 8 years - but he worked really, really hard to make sure Iran pumped as much oil as possible ( so much for global warming) - makes one wonder whose side he was on? 

Wiki says the US oil and gas sector makes up 8% of the US GDP.

I've read recently that the oil and gas sector provides a third of Russia's revenues.

I assume, oil and gas contribute nearly 100% to Saudi's revenues.

I think it's important to consider that data when one looks at the graphs below, and when one does that, I think both Saudi Arabia and Russia face huge economic challenges going forward.

A third point: there's nothing to suggest that the graphic won't become even more remarkable when it's re-drawn ten years from now.

I have a bit of difficulty reconciling the above graph with the graph below which has been posted numerous times when it comes to Russia ... and then one looks at the x-axis on the graph above. Over ten years, Russia's production has only increased by one-half million bopd.

I've talked about this on numerous occasions over at "The Big Stories."

By the way, in the graphic at the top, what major continent/region is not even represented? Yup, Europe/the EU. One wonders with all the cutbacks on the continent whether the EU/Europe actually showed a decline. Of course, there's Great Britain and Norway -- but as I've noted a long, long time ago, Europe is truly at a tipping point. The most recent linked story at that site: Europe is importing a record amount of coal (February 22, 2018 -- earlier this year).

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