Barton Biggs Spoke With A Well-Connected Businessman Who Says Saudi Arabia Has A Plan To Bankrupt...

BusinessInsider ^ | May 30, 2012, 7:03 PM | Matthew Boesler

[jwsea55]

Barton Biggs, the storied hedge fund manager who runs Traxis Partners, recently had an interesting encounter recently over lunch with a Saudi businessman who explained to him the real motivations behind Saudi Arabia's ramp up in oil production and why oil prices will likely continue to fall as a result for an extended period of time.

It's all part of a plan hatched by the Saudi royal family, according to Biggs, who relays this conversation in a note just published by Itaú BBA. Biggs says he asked the man what his outlook for Saudi Arabia was in the medium and long term, and the man was particularly negative about this, even given the vast riches of Saudi Arabian oil wealth.

Here is what Biggs writes about his conversation with the Saudi man:

"You have to understand our geo-political equation and vulnerability,” he said calmly but intensely. “Our two most dangerous enemies are Iraq and Iran. Both are Shia, and both are trying to destabilize the Arab world and our Sunni kingdom by funding terrorism. Our only weapons against them are our wealth and our oil...

[jiggyboy]

The 2008 collapse was a direct, inevitable result of the collapse of the obviously unsustainable housing bubble. Only the date was unpredictable in advance.

That said, the housing bubble was a knowing and deliberate operation that could have been stopped at many points after its inception in 1986; it was a conspiracy of both parties and the Federal Reserve that it was not.

[jwsea55]

The Obama administration is pressing Saudi Arabia to boost its oil output in order to fill a supply gap arising from economic sanctions on Iran, US President Barack Obama’s approval rating now stands at 41%, a nine-point drop from his position just one month ago, according to a New York Times/CBS News poll released Monday. A recent Washington Post/ABC News poll put Obama’s job approval at 46%, down four points from last month.

arabiangazette.com

Interesting article, thanks.

[TexasRepublic]

“It sounds like a very reasonable plan to me.”

Really? That plan is a double-edged sword. What do you think cheap oil prices will do to our domestic oil companies? The repeated boom-to-bust cycles have hurt domestic oil production and contributed to our failure to achieve energy independence.

[BlackVeil]

Another complication is the other Gulf States, especially Dubai. The Dubai banks are barely solvent. If they default, the knock on effects will be huge. The banks have been making payments so far, although construction companies in the Gulf are coping with their debts by repudiating them.

The Gulf banking system needs oil to stay around $100, in order that they can keep afloat.

[Daaave]

See The Prize, by Daniel Yergin

I didn't read the book, but I saw the PBS Documentary.

[Daaave]

You’re welcome.

[jwsea55]

I read The Prize. Good but the book was very long. Interesting thing about the book is how many times it has been thought we were going to run out of oil.

IBD had a great OP/ED The Myth of Scarce Oil