The Saudi Arabian Oil Company, Saudi Aramco,
has amassed a worth estimated between 1.25
trillion and 10 trillion dollars. Making it the
world’s most valuable company. But now,
Saudi Arabia is planning to get out of the
oil business entirely.
On April 25th, 2016, Deputy Crown Prince Mohammed bin Salman
announced the beginning
of the “Vision 2030” initiative, which
aims to steer the country away from its current
economic addiction to cheaply produced oil.
This plan requires Saudi Arabia to float stakes
in their massive company while also setting
up one the world’s largest investment funds
and trimming those sweet, sweet perks the government
has historically provided to its citizens. The
Kingdom spends an estimated 61 billion dollars
on these benefits each year. Sounds pretty
ambitious, right? To quote Billy Mays - Wait,
there’s more: according to the deputy crown
prince, the Kingdom aims to rid itself of
oil dependency by 2020, a move that experts
like Capital Economics’ Jason Turvey find
…dubious, to say the least. But the Kingdom
is putting actions behind the rhetoric. By
selling 5% of the world’s largest oil company
in an IPO, the government is also laying bare
the books of a notoriously secretive, global
operation. All this leads us to a bigger question
– is oil on the way out? Currently the world
runs off fossil fuels, to the detriment of
the environment. While alternative forms of
energy exist – solar, nuclear, hydropower,
wind and so on – none have yet been able
to match the efficiency and profitability
of good ol’ crude. Recent breakthroughs in oil
extraction technology (such as fracking) have
driven a drop in prices. For energy exporters
like Saudi Arabia and, for that matter, Russia,
this spells bad news on the economic front.
This might not be a symbolic gesture, but
a matter of survival. And what happens if
Saudi Arabia succeeds? Will other countries
follow suit, diversifying their economies
and attempting to kick the fossil fuel habit?
For now, it seems like a pipe – or should
I say oil pipeline? – dream, but it’s getting
less and less implausible. For decades we’ve
known that an oil-powered global economy is
not sustainable over the long term, but now
it seems the end of the bubble may be closer
than we thought. So what's next? Let me know
what you think could replace oil – or what
will happen when we run out. And, as always,
thanks for watching. If you’d like to learn
more, hit me up on twitter or visit us at
now.HowStuffWorks.com.
