A Saudi Prince isn’t hiding his fear of the rising North American energy juggernaut, and is publicly calling for his country to start working on diversifying its economy away from a near-total dependence on crude. This isn’t the first time that billionaire Prince al-Waleed bin Talal has aired these concerns, and this persistence underscores his belief that the House of Saud is ignoring American shale at its own peril. The Globe and Mail reports:
[Prince al-Waleed bin Talal issued] a rare public challenge to Saudi Arabia’s political elite, whom he believes are recklessly ignoring economic threats posed by shale oil discoveries in the United States.The Prince makes this point repeatedly in an interview with The Globe and Mail, one of his first since he rattled global oil markets in July by disclosing on his Twitter account a letter to Saudi Arabia’s Oil Minister. The missive warned that the American shale oil boom would soon threaten demand for crude from members of the Organization of Petroleum Exporting Countries.New shale oil discoveries “are threats to any oil-producing country in the world,” he says.
Shale isn’t just squeezing the Saudis, it’s threatening every OPEC nation whose national budget relies so heavily on oil revenue. Already we’re seeing American production replacing OPEC oil—last year, OPEC liquid fuels production contracted by nearly a million barrels per day, a loss that was more than offset by American growth.To be sure, Saudi oil still matters, not just to the US, but to the global market. Saudi reserves can be called upon to make up for supply disruptions in places like Libya or Nigeria, which can help smooth out the price shocks such disruptions might produce. But Prince al-Waleed bin Talal is right to worry about his country’s long-term future. As he says, “ninety-two per cent of Saudi Arabia’s annual budget comes from oil.” The Prince is giving words to the nightmare the rest of the royal family must be having: shale is leading the world’s petrostates to a day of reckoning.