The Saudi Oil Refinery Shut Down Impact on Oil Prices Will Tell Us If the World Is In an Extreme Oil Glut, the IPO of Aramco, and the Future of Electric Cars

The Aramco IPO is the mother of all “insider sales” and definitively marks the end of the hydrocarbon era.
Crude oil has been heading lower in spite of attacks to tankers in the Straits of Hormuz that would have in previous years sent the price up $20 quickly.
  • Despite a spate of recent attacks on oil tankers in the Straits of Hormuz (amidst a tightening with both Iran and Venezuela having been fully removed as suppliers), the price of oil has hardly reacted to it — and in fact — has been going down.
  • Moreover, these facts combined with the fact that global auto industry is moving their design chain over to electric cars, I believe has pushed the Saudis to return to the idea of conducting a massive $1.5 trillion initial public offering of Aramco — typically described in the press as the “world’s most profitable company.’
  • Why would one sell the most profitable franchise ever if it weren’t perfectly clear to the insiders that they’d be better off selling Aramco when there is still growing demand for oil? The Aramco IPO is the mother of all “insider sales” and definitively marks the end of the hydrocarbon era.
  • Ironically, though, these trends may contribute to a perverse situation where the auto industry is making electric vehicles commercially viable for consumers while at the same time oil prices come crashing down as global suppliers try to get any price before demand permanently dries up. This would slow down the rate of electric vehicle adoption in the developed world and could stop it all together in developing countries.
  • A debt bubble could collapse of oil companies operating in the Permian Basin of Texas that have largely been linked with moving the US to the number one oil producer spot. A declining price of oil would hurt these operators and there would be a rationalization of these producers along with some risk for a banking / credit crisis for lenders with heavy exposure to these names.
Oil refining is sliding out of the frame of relevance to the 21st century economy.

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macroESG.com: markets, politics + technology for a sustainable future | futureblog.org: tomorrow’s news today | IG & Twitter: @gregbeier

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Greg Beier

Greg Beier

macroESG.com: markets, politics + technology for a sustainable future | futureblog.org: tomorrow’s news today | IG & Twitter: @gregbeier

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