The World of Energy is Changing Fast
The landscape in the world of energy is changing faster than we might expect. Low oil prices forced Saudi Arabia to borrow $4 billion over the last year, CNBC reported. The oil rich kingdom had to borrow the money to cover a budget deficit that was larger than expected.
It is not known how large Saudi Arabia’s deficit is but unknown analysts quoted by CBNC estimated the Saudi deficit at $130 billion. Saudi Arabia is still very rich though it still has cash reserves of around $737 billion. Some experts think Saudi Arabia will have to start cutting spending because it simply cannot finance its lavish economy with $58 a barrel oil. The Saudis would need $105 a barrel oil to cover all their costs.
Fund manager John Sfakianakis thinks Saudi Arabia could exhaust its reserves and end up having to borrow money to operate its government by 2018 or 2019 if spending at this rate continues. He also told CNBC that the Saudis need $105 a barrel oil just to cover all the costs of their spending.
The new energy crisis is that oil is no longer the cash cow it used to be. Oil producing companies and nations are making a lot less money these days.
Big Oil Sees Revenues Dropping
Nor is it just Saudi Arabia, the world’s largest oil company Exxon-Mobil (NYSE: XOM) saw its revenues fall by $63.44 billion between March 2014 and March 2015. The energy sector is being completely disrupted by new technologies even without the advent of low energy nuclear reaction (LENR).
That disruption could be about to get a lot worse, Tesla Motors (NASDAQ: TSLA) has tripled the amount of land it owns near its Gigafactory in Nevada, The Wall Street Journal reported. The electric car and battery maker had owned around 1,000 acres near Reno, it bought an additional 1,863 acres next to the Gigafactory site.
Tesla does not yet have to plans to expand the gigantic gigafactory but it needs the additional land for something. That something could the stationary storage batteries Tesla is marketing as the Powerwall and Tesla Energy. Elon Musk told reporters that initial demand for the lithium ion batteries was so high he was thinking of expanding the Gigafactory’s production.
If that was not enough, Tesla apparently has options to purchase thousands of additional acres in the area, The Journal reported. Tesla is apparently planning expansion it has taken out new credit lines of $750 million to bankroll its expansion.
Tesla’s success could spell big trouble for oil producers like Saudi Arabia because it looks as if Elon Musk now has the resources he needs to make electric powered cars competitive with fossil fuel burning vehicles. One has to wonder how long Saudi Arabia can remain a major power and Exxon can remain a major corporation if the world starts running on electricity.
It also shows us the kind of disruption we could see if LENR ever became a practical energy source. If just a drop in oil prices could Saudi Arabia and reduce Exxon’s revenues what will happen if LENR starts producing massive amounts of extremely cheap electricity. We could see some giant companies and even nations disappear or shrink to a much smaller size.
The world is changing faster than we thought because the entire energy industry has been completely disrupted. That disruption is only the beginning of a series of changes that will transform the energy industry beyond recognition.