Aramco is the national oil company in Saudi Arabia. It has largely built this country. It is huge.
The other day some accounting firm announced some fairly-firm numbers. The company made about $224B/year in “core earnings.” (It holds $48 in cash. They will not tell me where.) “Net income” was $110B last year.
I have only the loosest idea what these classifications mean.
It seems a lot of money. But there are about 30M Saudis. That is less than $7,000/Saudi in “core earnings,” or about $3,500/Saudi in “Net Income.”
I realize the company pays a large amount in tax, 75% of the price of each barrel if my memory serves.
But how can Aramco so dominate the local economy when it does not make very much when viewed as a “per Saudi” figure? I have a very minimal background in all this, so type slowly.
Because petroleum accounts for 45% of the entire Saudi Gross Domestic Product. And because the Saudi government has take those profits over the years and invested them into areas like agriculture and clean drinking water.
A lot of that money is tied into spending Aramco does inside the country. There are multiplier effects. It has tens of thousands of employees in Saudi Arabia alone and they will spend a not inconsiderable amount of money inside the country. Plus whatever spending Aramco itself does locally (construction, service, real estate, etc).
That last point is kind of important, not just in Saudi Arabia but here in the US. In the same industry, when oil prices collapsed a few years back, North Dakota was hit hard. A lot of workers left, and local businesses dried up - the businesses associated with the oil companies (housing rentals, food vendors, construction services, cleaning services, etc) lost their income. And those aren’t included on the bottom lines of oil companies. Likewise, Aramco has an impact far beyond the money it directly brings in. That’s going to have a larger impact than computing solely revenue divided by population.
I agree mind bogglingly large for one company and also much larger than total corporate net income as a % of each country’s GDP. Total US corporate net profit as a % of US GDP recently has been around 10%, which is a multi-decade high.
Aramco’s alone, on the lower figure of $110bil would be something like 16% of Saudi Arabia’s GDP, and presumably a lot of the difference from the higher figure (33% of GDP) is tax to the Saudi state
The higher figure ‘core’ appears to be some kind of Earnings Before Interest Taxes Depreciation and Amortization measure, rather than the alternative meaning of ‘core earnings’ which can refer to net income for a company’s main business excluding extraordinary charges. The Aramco EBITDA is presumably subject to a high tax rate as one of the main means by which value is extracted from the oil business to support the Saudi state, as opposed to say doing it by charging some severance tax per bbl which would already be subtracted out of EBITDA, or maybe both.
But overall the Saudi economy is largely based on large scale production of relatively cheap to extract oil, as compared to the world market clearing levels of oil production cost and price. There’s a huge profit in that national business relative to the whole Saudi economy that’s going to show up somewhere. Where depending on how you account for the value of having direct access to that cheap oil.
GDP capita is usually expressed on a purchasing power parity scale to discount for currency differences. My understanding of the Saudi economy is that they import lots of cheap labor from poor countries so that prices are very low compared to developed countries. This means that although Aramco’s revenue per capita is not that high, it is not expressed in PPP so if you just look at that it significantly underestimates the actual value of Aramco to the total economy.