Saudi Arabia’s deputy crown Prince Mohammad bin-Salman, popularly known in short, MbS, released an ambitious plan, Vision 2030 on Monday, which got approved by the cabinets on the same day. And today, is Wednesday, so I am quite sure that by now you are familiar with the plan, at least its central theme to diversify away from oil.

But what we are slowly digesting is, what it means, not for Saudi Arabia, but oil price and its future.

According to 2014’s calculations, total proven reserves of Saudi Arabia, stands at 267 billion barrels, or 15.7% of total global reserves and only second to Venezuela. When a country with such huge reserves are planning away from it, then it’s time to take a pause and rethink.

And coal gives us fairly good insight. In recent day’s world’s largest private sector coal company, whose share price was trading as high as $1200, few years back, went bust in U.S. Again that followed Czech Republic’s biggest coal miner went bust. Like decades ago, pure wood lost its relevance to other energy sources like coal and oil, coal lost it to oil and gas.

And if History rhymes, just as Mark Twain says, next in line is oil, which will lose out to gas and renewables.

But that is hardly the point here, this has been something, we have been warning for quite some time now, It’s good for Saudi Arabia that they recognize the threat and intends to take measures, at least try.

Hence, Saudi Vision 2030.

Hence comes the point, (try to think from Saudi Arabia’s perspective, who is world’s largest oil exporter and that being its main source of revenue) –

If you know, that at one point of time in not so distant future, oil will be left under the ground, just like coal is being left today and you have large chunk of that under you, won’t you try to forward sale that as much as possible?

Most logical answer would be yes and whomever can produce at lowest will win the day. That is why Saudi Arabia has a vision, which is why supply from Saudi Arabia unlikely to see big drops. The country will try to sell as much as possible, above cost curve.

All producers are likely to try to push their cost curve down and stay in the game, those who can’t will probably go bust.

So, supply side shrinkage won’t be much to provide support to oil price, if demand sags. But currently in the world cost curve is too high, which may lead to temporary cutbacks on supply until the curve improves

Let’s answer the question we asked – Can oil price go up, if Saudi Arabia has a vision?

Yes! Of Course, in the near term, or even in medium term because demand has still got some juice, with especial thanks to China and India and with quite a large chunk of supply still above price curve.

But can oil dominate global energy and politics?

The answer is “NO”.