American Oil and Gas Reporter - October 2018 - 107

Saudi's Aramco Plans Raise Questions
BACHELOR GULCH, CO.-Saudi
Arabia's plans for its oil production sector
and why the debate over greenhouse gas
emissions has become a growing concern,
held prominent places on the meeting
agenda for the Western Energy Alliance's
annual convention, held Aug. 8-10 at the
Ritz-Carlton in Bachelor Gulch.
Benjamin Zycher, a resident scholar
at the American Enterprise Institute,
called plans by the Saudis to sell part of
Saudi Aramco, the kingdom's stateowned oil company, quite interesting,
saying one possibility for the move was
they decided that it was more efficient
for someone else to bear part of the risk
of oil market fluctuations.
"But why would that happen now?
Another hypothesis is the House of Saud
may be thinking it is better to get a lot of
revenue upfront. After all, there was the
1979 takeover of the Grand Mosque, the
2003 Riyadh bombings, and the Iranian
threat, particularly with a nuclear armed
Iran, post Iran-Iraq war," he posed.
In her Alliance presentation, Amy
Harder, a reporter on energy and climate
change for Axios, considered how the
widespread scientific consensus that held
human activity significantly responsible
for increasing global temperatures had
not made a deep impression on U.S.
voters, noting that climate ranked second-to-last among concerns expressed by
Americans participating in a Pew survey.
"The polarization and low saliency of
this issue are a perfect recipe for a stubborn
political stalemate," she asserted.
Aramco
Saudi Arabia announced plans to partially privatize Aramco early in 2016 as
part of the modernization project Vision
2030, media reports indicate. The Saudis
planned to sell 5 percent of Saudi Aramco
though an initial public offering, but the
kingdom announced postponement of the
sale earlier in 2018.
Zycher posed to the Alliance the question of why the Saudis would have so
much trouble arranging a sale of the oil
company, stating it should not take long
to arrange what amounted to an oil sale.
He proposed that the kingdom was evaluating the IPO under various scenarios,
and that potential buyers were concerned
that Saudi Arabia was aware of otherwise
unknown factors.
"If the Saudis think they are going to
be overthrown, then they have a huge incentive to increase production now and
let prices fall," he offered. "Annual rev-

enues will go up for a much shorter
period, so the present value of the revenue
stream, if they are looking at a 100-year
horizon, is $6.5 trillion; if they think they
are going to have to skip town in 10
years, it's only $3.8 trillion.
Shortly before the Alliance meeting,
Iran claimed ownership of the Straits of
Hormuz, prompting oil analysts to consider
the global impacts of what media reports
indicate would be shutting in 20 percent
of the world's oil trade. In his evaluation
of the possible long-term impacts of Iranian action, Zycher examined a 10-year
shutdown of the Straits and the resultant
loss of 25 million barrels a day in Persian
Gulf exports as one intellectual exercise.
"The market is about 100 MMbbl/d,
if you include natural gas liquids. So
under reasonable assumptions about elasticity and demand/supply conditions, it
is interesting to play a dynamic price
game, under the assumption other important parameters do not exhibit any
unexpected shifts. My computer game
gives me this: If you assume prices start
at $75, the price climbs above $325, and
slowly declines to $118 by the end of the
10-year period," Zycher described.
Greenhouse Gases
The debate over GHG emissions is not
primarily a policy issue, but an ideological
one, because the left-wing environmental

Benjamin Zycher, a resident scholar at
the American Enterprise Institute, recommends the Western Energy Alliance
monitor Saudi Arabia's proposed plans
to sell part of Saudi Aramco, the stateowned oil company. Speaking at the
group's annual convention, held Aug. 810 at the Ritz-Carlton in Bachelor Gulch,
Co., he said the kingdom postponed the
sale earlier in 2018.

movement has far more interest in it as an
ideological goal than its environmental
benefits, Zycher told the Alliance. Even
the terms used in the debate-carbon and
carbon pollution-are elements of political
propaganda, he argued.
"Carbon dioxide is not carbon; carbon
is soot, and it is not a pollutant," Zycher
said. "A certain minimum atmospheric
concentration of carbon dioxide is necessary for life itself. Water vapor and clouds,
water vapor in particular, are responsible
for the overwhelming majority of the troposphere's radiative properties. Why don't
people call water vapor a pollutant? I
urge you not to use either 'carbon' or
'carbon pollution.' Use 'greenhouse gases,'
because that has the virtue of scientific
accuracy without implicitly assuming the
answer to the underlying policy question."
Media reports commonly frame the
question as a matter of whether climate
change is real, an inquiry he described as
analytically meaningless. "What they are
really asking is, is there evidence that increasing GHG concentrations are having
effects that are detectable? The answer
to that is yes," he said.
Climate prediction models suffer from
at least one common mistake, he pointed
put: They typically predicted increasing
GHG concentrations would create an enhanced heating effect in the tropical midtroposphere. Although there is supposed
to be a hotspot about 10 to 15 kilometers
in altitude in the tropics, he said it never
has been found.
Increasing GHG concentrations warm
the earth to some degree, Zycher indicated, so the basic theory that global
warming is a hoax is simply wrong, or
inconsistent with the evidence. He said
according to the National Oceanic and
Atmospheric Administration, the decade
with the greatest number of days with
temperatures hotter than 105 degrees
was the 1930s. Other data collections
show land/ocean surface temperatures
declining from 1883 to 1910, posting a
sharp increase through the 1940s, and
then cooling until the mid-1970s. Those
temperatures have remained consistent
through 2015, he noted.
The fifth assessment report from the
United Nations' Intergovernmental Panel
on Climate Change argues global temperatures are in a long-term upward trajectory, Zycher said.
"That may be true, depending on how
you interpret the data. But the report also
argues the recent trend is 'extremely
likely to be anthropogenic.' The problem
OCTOBER 2018 107

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