01 Recently I have visited and witnessed history.
April 20th crude oil collapsed, and the US WTI crude oil price fell to a negative value for the first time in history, down 306%, closing at -37.63 per barrel, and it is not common to sell things by paying money.
You should know that a week ago, the "OPEC+" composed of oil-producing countries just reached an epic production cut agreement, jointly reducing production by 9.7 million barrels per day since May 1, equivalent to 10% of the current global supply, to alleviate the crisis of sharp drop in crude oil demand and price plummeting since the outbreak of the new crown epidemic.
The agreement has not started yet, why has oil prices fallen to negative value?
In fact, this is just a May contract. April 21 is the delivery date of . If you don’t take it off, you will have to trade it. You have to buy it and store it. It is also a expense. However, due to the impact of the epidemic, the global economy is too weak, and the planes are not flying much, and there is too little demand. Then I had to sell it first regardless of the cost.
Oil price trend is very similar to the Three Kingdoms Kill, full of various conspiracies and conspiracies.
Currently there are three protagonists, the United States, Saudi , and Russia. Some netizens have summarized the plot, which is probably like this:
In fact, this story can be extended to 2008. In essence, is a tragic struggle between the two systems on the pricing power of crude oil.
02
The oil industry has only appeared for a hundred years, and most of the time the price of crude oil is manipulated.
The familiar OPEC is mainly doing this, and Saudi Arabia is the leader among them.
Oil prices are low, so reduce production. High oil prices will increase as well as . After the balance point, the oil price will start to drop again, so reduce production... This routine has been played for many years.
After Russia cleaned up several oligarchs, it quickly adapted to the rules of the game, because in essence, these are all state-owned monopoly methods and are all experts.
Since 2008, the United States has begun to join this game. American oil merchants are not state-owned enterprises. They advocate invisible hands. As long as it is profitable, no matter what agreement is not agreed, over the past decade, OPEC and Russia have been experiencing hard work to maintain oil prices. But looking back, 's daily oil production increased by 11.6 million barrels, of which 8.5 million barrels were contributed by the United States, accounting for 75% of the increase. In 2018, the United States became the world's largest oil producer.
If there is too much oil, the price will not work, and it will be more difficult to maintain the price. Major oil-producing countries such as OPEC and Russia, led by Saudi Arabia, have become direct victims. The most important thing about
is that they realize that they can’t continue to play the trick of “controlling prices” in the past, which is the more terrifying thing.
, who is used to being the leader, Saudi Arabia knew that those profit-oriented businessmen in the United States did not listen to him at all, so they started to talk to Russians about production cuts. Unexpectedly, the Russians refused. In fact, the reasons were very sufficient -
wanted to reduce production, and major oil-producing countries should reduce production together, otherwise it would be useless for us to reduce production alone. The United States will soon make up for the production cuts and the market share will be larger. Isn’t this cheap for them?
negotiations failed, Saudi Arabia became angry, so there was a big news that oil prices plummeted by 30% on March 8, which caused the US stock market to break many times, and everyone is familiar with these.
Of course, another saying is that Saudi Arabia and Russia play a double act and fight a price war, with the purpose of kicking out the US shale oil manufacturers. You should know that the cost of US shale oil is about US$40-60, Saudi Arabia is 2-5, Russia is not high, and the oil price falls to US$20-30. Saudi Arabia and Russia can still make money, but US shale oil manufacturers can only go bankrupt.
But there are no winners when they fight in a few rounds. Saudi Arabia and Russia have reached a new production cut agreement, but they did not expect that the United States is even more ruthless.
03
Some analysts say that the fall of crude oil futures prices into negative values is the United States' counterattack, using the futures market to seize pricing power.
isn’t it going to fight a price war? Then let’s fight to the end. The United States may bankrupt a bunch of companies and its employment data is even worse, but this will have a great impact on Saudi Arabia and Russia.
Some people in the United States also suggest directly imposing import tariffs on Saudi oil, and even threatened to cancel their military protection commitments to Saudi Arabia and withdraw US troops from Saudi Arabia.
In short, it means to educate me.
is the same. No wonder Americans are not convinced. After all, without the United States, there would be no Saudi Arabia today. Exaggerated? not at all.
Before Americans came to Saudi Arabia, Saudi Arabia was a very barren place, with population, water, electricity, and infrastructure, and everything was lacking.
In 1932, the Saudi leader in Kuwait, Abdul Aziz, led his camel cavalry to capture Riyadh and establish a contemporary Saudi regime.
The next year, Americans came because they speculated that under the desert of Saudi Arabia, like other Gulf countries, was rich in oil.
The two parties reached an agreement that California Standard Oil (Socal) purchased the oil extraction rights on the eastern coast of Al Hasa. They set up a new oil company in Saudi Arabia, which is the predecessor of Saudi Aramco .
signed the contract, and the Saudi royal family received £35,000 at one time, and another £20,000 18 months later. If oil can be found, it will pay more and there will be a share of oil sales. Today, is this called money in Saudi Arabia? All these conditions are acceptable, you can imagine what the suffering is like.
At that time, the Saudi royal family did not believe that there was oil under the desert, and specifically instructed the engineers and geologists in charge of exploration to tell him if they found groundwater.
The first well had no oil, and the second well had oil, but it disappeared in a few days.
Americans worked intermittently for five years, but they just couldn't find oil. When we arrived at the seventh well, there was constant accidents. The side wall collapsed and the drill rod disappeared. After 4,500 feet of down, there was still no oil. The management was a little desperate. They didn't know when they would dig, so they decided to reduce costs, so they simply stopped digging new wells and drilled down based on Well No. 7 now.
As a result, the oil was produced and it could produce 4,000 barrels per day.
04
From then on, Casoc discovered more and more oil fields in Saudi Arabia in more than ten years. In 1944, Casoc was officially renamed Arab American Oil Company, and "American Oil Company" officially debuted.
Americans were very happy and built large-scale residential areas for oilfield workers, built office buildings and residences for company managers and geologists, and also built airports, hospitals and power plants.
At that time, the Saudi royal family saw it and envied it in their hearts. They also want to build a house so that their families and their citizens can enjoy a modern life.
Before oil, Saudi Arabia had two fiscal revenues, one was tax collection, accounting for 30%, and the other was pilgrimage revenue, accounting for 70%.
But shortly after the Americans dug out the oil, the share fee paid by Aramco Petroleum to the Saudi royal family exceeded the pilgrimage income, and the share income was still increasing year by year, so the Saudi royal family began to spend money desperately.
At that time, Crown Prince Saud borrowed from Amei Company, built palaces, built RVs, built roads, hospitals, schools, etc. The cost of these infrastructures was very fast and vigorous. The senior executives of Amei Company began to worry about whether Saudi Arabia could pay back the money.
In fact, their concerns are right, but the object is wrong. What needs to be worried about is not the finances of the Saudi royal family, but their own positions.
Because Saudi Arabia aims at Aramco's profits.
05
Seeing that Americans have made a lot of money on their territory, Saudi Arabia can no longer sit still. Why should such a good money printing machine be shared with others?
At that time, the royal family was not clear about the oil industry and the rules, but they knew that the Americans had paid so much money to them and earned more than that, so they began to put pressure on the Americans slowly, wanting to share more.
The Saudi royal family hired an American consulting company to investigate Amei and made two important discoveries:
●1. In 1949, 38% of Amei's total profit was handed over to the US National Tax, with a total amount of US$40 million;
●2. The oil sold by Amei to the parent company is priced at US$1.73 per barrel, while the average oil price in the Gulf region is US$2.41, which is equivalent to secretly reducing Saudi Arabia's oil share.
is not kind!
With these two questions, the Saudis asked the Americans to renegotiate, and of course the Americans refused to submit. They always felt that the Saudi royal family was a huge cost center, cunning, greedy, lazy, so they complained to the old Saudi king. The old king was also quite straightforward, and directly crossed his hand to his neck to make a cutting action, saying, "(Your method) was used to be beheaded."
So the Saudis achieved their wish and obtained it. More sharing, but this is far from their goal. What they thought was to get Ah Mei completely with , but they had a lot of concerns at that time. Saudi neighbor Iran had played the same drama with the British, but they ended up ruining:
In 1951, Iran directly controlled the Abadan refinery, forcing the British to evacuate, and since then it established the Iranian National Oil Company. But they were also retaliated against, and the British sent warships to block the bay near the refinery, directly locking down Iran's road to selling oil.
Saudi Arabia has learned from Iran's experience. Using force in this way will give the other side a reason to send troops.
What's more, Saudi Arabia had no confidence at the time, mainly because it had no talents and could not manage it even if it was taken back. It is likely to be wasted.
06 The plan needs to be done step by step.
The Saudi royal family first sent many princes to study abroad , and also studied many schools in China. In 1959, a scholarship program was launched to send Saudis to the University of Texas to study petroleum engineering. After returning from their studies, they went directly to Amei to work. Later, many of Amei's executives were students of this scholarship program.
By 1970, Saudi Aramco's crude oil accounted for half of the world's oil market. At that time, household cars in the United States were very popular, oil was cheap, and preferred high-power cars. Oil gradually changed from self-sufficiency to import, and Saudi Arabia benefited the most.
From 1972 to 1973, Aramco's daily production increased from 5.4 million barrels to 8.4 million barrels, and black gold flowed into Saudi Arabia.
With money, the Saudis have become stronger and feel that Americans interfere too much.
At that time, OPEC had been established for several years, but it has been mediocre. In most cases, countries just formed a group meeting and signed contracts with large oil companies such as ExxonMobil, BP, Shell, etc., and basically couldn't make the decision on the price.
After the surge in production in 1973, OPEC oil-producing countries awakened their self-awareness and said: we want to raise prices!
Oil companies flatly rejected their request. It was during the Arab-Israel war, so Saudi Arabia joined hands with its partners to impose an embargo on countries that helped Israel. The Saudi oil minister publicly stated that we will lift the embargo only after Israel withdraws its troops.
This time, the crisis is coming.
The oil prices in the United States soared, and the people complained and changed cars to save fuel.
At the same time, Saudi Arabia's plan to take back Amir has been proceeding in an orderly manner. They are very considering their relationship with the United States. Middle East The world generally directly and roughly nationalized some Occupy oil companies, while Saudi Arabia adopted the method of acquiring shares. Finally, in March 1980, received all the American shares in its own hands, and finally could enjoy such a good money printing machine.
07
After oil was squeezed into its own hands, the output has repeatedly hit new highs. Saudi Arabia's voice in OPEC has become higher and higher, and the temperament of the leader is revealed.
At the same time, a large wave of developing countries' economies have developed greatly, oil consumption has increased greatly, and oil prices have continued to rise, until the high price of $147, which has caused Americans to complain, and Saudi Arabia has become a world-recognized local tyrant.
In 2018, Saudi Aramco produced 13.6 million barrels of oil per day, exceeding all other companies. In the World Cup match of the same year, because Russia scored 5 goals, Saudi fans in the audience showed off their wealth and covered their faces with their hands:
There are too many similar local tycoons showing off their wealth, which makes many people wish they could be born in Saudi Arabia, and it is best to be born in the royal family.
There are 22 wives (and some say 34) who have a clear marriage relationship with the first king Aziz, more than 90 sons, more than 40 legal princes, and two brothers who fought together. When King Aziz passed away, the royal family had reached more than 5,000 people, and now the scale may reach 15,000 to 20,000 people. These people are the "core royal family" with high treatment. They drive luxury cars, raise big cats, or book planes to transport big birds at any time:
It is said that each princes spend 43,000 US dollars a day, and other royal families also receive a lot. This brings a question, how many mines can withstand such spending?
Oil exports account for 40% of Saudi Arabia's GDP, 80% of fiscal revenue, and more than 90% of foreign exchange revenue. Therefore, the fluctuations in oil prices have a great impact on Saudi Arabia, which is also the reason why they value pricing rights.
If the cost of breaking through shale oil technology drops greatly, or alternative energy sources appear in time, then Saudi Arabia's wealthy life will not last long. Therefore, it is understandable that they want to crush the US shale oil industry chain by killing one thousand enemies and losing 800 yuan.
The curse of the country has been staged countless times. If you don’t have enough money to sell resources, you will not be enterprising and industrialization will be slow, which will eventually lead to closing your eyes to count money at the peak of the resource price cycle and facing bankruptcy at the trough of the price cycle. Interested readers can read another article written by Mao Ge before, "Mongolia's Resource Curse".
This article is from Damao Finance
