Friday, July 23, 2004

Correction: Overstated Saudi Oil Revenues on "Blood For Oil" Part 4

I was recently informed by a commentor that I may have overstated the value of the Saudie Oil revenue in Blood for OIl Part 4 under the section titled "That Nasty Thing Called Oil". After reviewing his logic, I would agree. Mike in SC states:

About the 432 trillion dollars Saudi "produces"That number is a bit far fetched. In fact, per Yahoo finance Saudi GDP was only 191 billion (1995 dollars) or $227 billion in today’s dollars (2004) by contrast this is a mere 2.36% of our $9.63 TRILLION GDP and ONLY 55% of OUR DEFENSE budget $416B. And Saudi is producing 9.9 Mbbls/d with an estimate capacity to produce 13 Mbbls/d MAX for the foreseeable future. It is doubtful even the Saudis could maintain production let alone al Qa'eda without technical ex-pats. Although this sound like a lot of money they are in fact 31st of 191 countries in GDP. One also must take into account that oil prices fluctuate wildly they were $10/bbl just 2 years ago. Thirdly, Saudi produces 4 grades of crude heavy, medium, light and ultra light that all sell for different prices. Currently Saudi light in NYX is only $36.19/bbl with medium at $31 and heavy at $30 or so. Out of that GDP must come expenses to maintain oil production and the nation or the economy collapses, 23 million people can't eat sand

Very good point Mike. I am very happy that somebody else read the info and was inclined to look it up.

While writing this section, I made a very common error: estimations based on general information. Because I simply wanted to show that the oil in Saudi Arabia was worth a lot of money and should not be placed in the hands of some crazy folks that would like to do us in, I did a "quick estimate" on known numbers without putting the details of gross revenue minus overhead, production costs and materials into the number. I also did not consider the very good point that Mike makes about the different oil types being worth different value per barrel and effect on total GDP

Excellent job Mike!

The rest of Mike's comments are on the original entry's comments if you care to read them.

In regards to whether the lack of accuracy on this subject denigrates the rest of the entry, I will stand by everything I write as I have never purposefully inflated a number or left out any number or information just to make a point. However, you may find that Mike pointing to an error in the work might lead you to consider that the work has more errors in it.

Please, be my guest to review anything I have said, find different information and post it here. I am more than happy to have somebody provide different information and debunk my debunking. This is the appropriate method for debating. You will note that I always provide the links to any data I am working with so that you have the opportunity to review the numbers yourself, without interpretation from me, and draw your own conclusions.

Thanks again.


Robert said...

It may still sound like alot of money, but that is merely revenue and not profits. Its a bad idea to confuse the two.

When you figure in the costs, I'd say the profits aren't that much of that. And anyway, the vast majority of the profits probably don't get funneled to anything critical. (People still have to get paid, and equipment and costs of operation must be covered).

Brian H said...

Graduate from the obsolete orphan, IE, to something like Mozilla or Firefox. And for "saving", I recommend the ClipMate utility. Every copied bit of text or link etc. can be preserved for as long as you want, and categorized in folders, etc. I'd be lost without it.

Brian H said...

Drilling sand for oil is cheap; KSA is making about a 200% markup even at $10, and the next $35 is all gravy. Unless you consider the whole Kingdom to be overhead!