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Comment by oooglaaa | Hacker News Reader

Saudi Arabia invested 45% of the 100B. It’s rare for a state to make such risky investments.

Either they have a lot of available capital, and the 45B is nothing but a line item, or they’re trying to dig themselves out of a hole and they need to take on big, risky investments to do that.

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Gotta do something to make sure you don't get sent to the Ritz Carlton Gulag[1]. https://www.bloomberg.com/news/articles/2018-07-07/saudi-ara...

[1] Note: not a joke. https://en.wikipedia.org/wiki/2017_Saudi_Arabian_purge

I don't know if $45B is a line item to them, but to give you a sense of scale of how much money the Saudis have, Aramco had a net income of about $34B in the first half of 2017 [0].

[0] https://www.bloomberg.com/gadfly/articles/2018-04-13/saudi-a...

That’s insane. That’s more than Apple, Amazon, and Alphabet’s 2017 net income combined.

How does a commodity business (oil and gas) generate so much profit?

Getting oil out of the desert costs very little. A couple of bucks a barrel. Current market price was 80 bucks last I checked. Margin.

Extract and refine it cheaply and then do logistics and shipping better. If you can do that and have enough, everyone will buy.

Oil/energy companies are still some of the most valuable in the world.

EDIT: also, demand is sky high. And OPEC works to manage our prices for economic stability.

Unlike (almost) every other business on earth where you have to do work and compete with peers to make a profit on your efforts, all the value of oil is sitting in the ground underneath them. Oil wealth is just luck of being born on top of the right geology.

And being part of an extremist tribe who were useful to the Brits/Americans versus the Ottomans in World War 1, who then continued to provide a “stable source” of oil. Stable because they stamped out any sort of democracy or society with freedoms that would allow anyone to object to their arrangements with the West, in exchange for one family of the tribe to become extremely wealthy.

>That’s insane. That’s more than Apple, Amazon, and Alphabet’s 2017 net income combined.

That's not insane, that's false. Just Apple's 2017 net income was $48.35B [1], more than the $45B in the parent comment.

[1] https://investor.apple.com/investor-relations/sec-filings/se...

The parent comment figure was for the first half of the year. In other words, Aramco had a net income of $34B in just six months of business.

> How does a commodity business (oil and gas) generate so much profit?

OPEC.

$34B is a lot in company scales but not a lot when it is the vast majority of a government budget used to sustain a very plush lifestyle for millions of people.

Saudi has been running huge deficits and have had to dig into their reserves to the tune of hundreds of billions of dollars to sustain their spending.

In the first five months of '15 they had to draw $65B from reserves just to meet costs[0]

They've introduced a new VAT, excise on fuel, cut health and education spending etc. to prevent the house of cards from collapsing[1].

[0] https://financialtribune.com/articles/world-economy/20960/sa...

[1] https://www.economist.com/middle-east-and-africa/2018/01/13/...

Further to that point, Saudi Arabia's population is expanding very rapidly, putting immense strain on those limited resources (which have to be used to continually pacify the population).

From 10m people in 1980, to 33m today.

That's only 3% growth per year.

Population growth in India/China when govt didn’t do any restrictions was ~2.5%. These days it has reduced to around 1.5%. USA is at 0.7%.

In other words 3% is very likely among the highest rate human population can grow with real-world constraints.

they are trying really hard to get away from oil as their only income

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