Illustration: Rebecca Zisser/Axios

The prospect of Saudi Arabia backing Tesla provides a glimpse into the kingdom's oil and economic strategy, and it's not as simple as a hedge against crude's long-term decline.

Why it matters: Saudi Arabia is OPEC's dominant producer and holds massive reserves, but the kingdom wants to diversify its economy away from crude oil at a time when some analysts see a global demand peak beginning to appear over the long-term horizon.

Driving the news: Tesla CEO Elon Musk offered new details Monday about his discussions with Saudi Arabia's sovereign wealth fund, called the Public Investment Fund (PIF), about bankrolling his take-private plan.

  • And that follows recent revelations that the PIF has already acquired a nearly 5% stake in the Silicon Valley electric automaker.

Between the lines: While EVs remain a niche market today (less than 2% of global sales), the Saudis are keen to invest in growing tech sectors — even one that will help erode oil's dominance in transportation.

But that doesn't mean they're envisioning the end of the oil age. They're also pouring massive resources into expanding state-owned petrochemicals giant SABIC, signaling deepening interest in oil's use beyond transportation fuels.

  • SABIC last year announced plans with state oil giant Aramco for a massive $20 billion crude-to-chemicals plant that could process 400,000 barrels-per-day in Saudi Arabia.
  • Petrochemicals, used for plastics and other materials, are projected to be a major growth sector for oil use in coming decades, even as greater efficiency and electric cars eventually sap oil demand for transportation.

What they're saying: Randy Bell, who heads the Atlantic Council's Global Energy Center, tells Axios he sees a connection between Saudi Arabia's Tesla investment and SABIC's expansion.

“It’s probably better thought of as a set of diversification strategies when it seems increasingly hard for the Saudis, over the medium term, to be a price setter.”
— Randy Bell

Tesla investment could be a hedge against oil's peak in transportation, or...

  • “There is a scenario where it becomes a win-win, where electric vehicles grow but transportation fuel demand doesn’t peak,” Bell says.
  • He sees the prospect of a “bifurcated” scenario where there’s widespread electrification in China, the U.S. and elsewhere, but oil’s use in transportation keeps growing thanks to fossil fuel-powered vehicles remaining dominant in fast-growing India and Africa.

The intrigue: A separate question is why cash-burning, still-unprofitable Tesla in particular is interesting to Saudi officials. Bell says it's consistent with other PIF investments in companies like Uber and the SoftBank group.

“It’s technology investment writ large with an emphasis on learning and human capital development and advancing their ability to innovate.”
— Bell, noting this is a goal of Crown Prince Mohammed bin Salman

The big picture: Sarah Ladislaw, an energy and geopolitics expert with the Center for Strategic and International Studies, sees a three-pronged Saudi approach:

  1. Growing investments outside the oil sector entirely.
  2. Going "deeper down the value chain" with petrochemicals.
  3. Wider investments in the automotive sector.

"I think this is a risk mitigation strategy against a world in which oil demand growth slows and plateaus," Ladislaw says. "They want to be competitively positioned no matter what."

The big question: Nobody really knows when worldwide oil demand will peak. Competing analyst and industry projections range from as soon as the late 2020s to beyond 2040.

Go deeper: Elon Musk confirms Saudi interest in Tesla.

Go deeper

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A building at the Meadowood Napa Valley luxury resort burns after the Glass Fire moved through the area on September 28, 2020 in St. Helena, California. Photo: by Justin Sullivan/Getty Images

Three people have died in a wildfire in Northern California and tens of thousands were evacuated across the state, as firefighters contended with strong winds and dry conditions that saw blazes explode across the state on Monday.

Driving the news: Shasta County Sheriff Eric Magrini confirmed the deaths occurred as the Zogg Fire spread across 15,000 acres, forcing the evacuation of 1,200 people. More than for 5o,000 people, per AP.

Updated 1 hour ago - Politics & Policy

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Global: Total confirmed cases as of 9 p.m. ET: 33,273,720 — Total deaths: 1,000,555 — Total recoveries: 23,056,480Map.
  2. U.S.: Total confirmed cases as of 9 p.m. ET: 7,147,241 — Total deaths: 205,031 — Total recoveries: 2,794,608 — Total tests: 102,342,416Map.
  3. Business: Companies are still holding back earnings guidance.
  4. Health: Trump announces plan to distribute 150 million rapid tests —The childless vaccine.
  5. Media: Fauci: Some of what Fox News reports about COVID-19 is "outlandish"
  6. States: Cuomo extends New York moratorium on evictions until 2021.
  7. World: More than 1 million people have now died from coronavirus — India the second country after U.S. to hit 6 million cases.
Dave Lawler, author of World
2 hours ago - World

Global coronavirus death toll crosses 1 million

Data: Our World in Data; Chart: Sara Wise/Axios

The global toll of confirmed deaths from COVID-19 crossed 1 million on Monday, according to data from Johns Hopkins.

By the numbers: More than half of those deaths have come in four countries: the U.S. (204,762), Brazil (141,741), India (95,542) and Mexico (76,430). The true global death toll is likely far higher.

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