The Great Oil Hoax

I cannot really vouch for the right of this story – but it was told to me, and sounds scary, if it gets to us. So, there is no reward of proving me wrong, but it can be disastrous, if you ignore it.

The story goes something like this – Arab Saudi’s oil supply is running dry fast and we cannot count on them to the rescue. To add credence to this, the story was told to me by this guy, who knows the energy business and he once told the senior US administration that the Saudi doesn’t have anything near the oil reserves they claim. And the oil production is about the drop sharply. If the charges are true – we could be facing oil at above US$100 per barrel and gasoline above US$8 a gallon or more. It is as simple as that!

Of course, if you listen to government officials, intelligence agencies, and even powerful Wall Street financers, they tell you the opposite. They say the Saudis could quickly double their oil production from the current level if they wanted to.

Americans used to run Aramco, the huge oil company that manages the Saudi fields. But in 1979, the Saudis booted it out and took over. Since then, the Saudis started keeping a secret. Experts try to figure out how much oil the Saudis sell by monitoring tanker traffic in and out of the world’s port. And that is how little we know for sure.

Since the take-over, their figures for proven reserves kept going up and up – even though they didn’t find any major new oil fields! In 1979, the Saudis adjusted proven reserves upwards by 50 billion barrels. Then eight years after that, their proven reserves magically grew by another 100 billion barrels. Their estimated reserves increased by 150% in nine years – to a total of 260 billion barrels and they didn’t find a single major new oil field!

For the last 17 years, they have claimed they own 260 billion barrels of proven oil in the ground. The figure never goes down, even though they have pumped out 46 billion barrels during that period. As recently as 2004, they claimed their reserve estimates are actually conservative. Trouble is – we’ve got no proof except they say so. If it were true, we wouldn’t have a thing to worry, but what if it is not.

Before Aramco was taken over in 1979, they told Congress that Saudi Arabia had proven reserves of 110 billion barrels. If that is true, about half of that has been used up since then.

Otherwise, it is a devious plan, and it has worked perfectly well until now. Or perhaps, everyone in OPEC does it as well. In the 1980s, OPEC’s claim of total reserves magically leaped from 353 to 643 billion barrels without a single major discovery. Industry experts call it the quota war, because the ability of each member of the cartel to sell number of barrels of oil is based on each member’s oil reserves!

It seems that everyone is claiming to have a bottomless well.