Transformation of Saudi Aramco into a sovereign wealth fund
What? Deputy Crown Prince Mohammed bin Salman unveiled his vision for the future of Saudi Aramco, the biggest oil company in the world, and the creation of the largest sovereign wealth fund with a potential value of $2 trillion. As part of the strategy, the Prince said that Saudi will start to sell shares in Aramco's parent company by 2018 and transform the oil giant into an industrial conglomerate, to make sure the country’s economy won't depend mainly on oil in 20 years. The Prince also mentioned that the Fund created would be big enough to buy the world's four largest publicly traded companies (Apple, Google, Microsoft and Berkshire Hathaway) and it will focus on acquisition in the financial industry.
So what? Notwithstanding the fact that the Saudi's plan could be too late, with a price of oil unable to reach high level prices of before June 2014 (around 100$/barrel) in the coming years, this strategy by Saudi’s officials clearly undermines the main commonly-held assumption about the future of oil consumption, which is supposed to dramatically increase with the emerging middle class in Asia. This could also be a signal that Saudi Arabia foresees a future with a growing share of alternative fuels.
Source: Bloomberg - Saudi Arabia Plans $2 Trillion Megafund for Post-Oil Era: Deputy Crown Prince