Saudi Aramco: The History and Power of the World’s Largest Oil Company
- Saudi Aramco, valued at over $1.6 trillion, dominates the global energy sector by producing over 10 million barrels daily with industry-leading efficiency and low production costs.
- The company originated as an American venture in 1933 and, despite being nationalized by Saudi Arabia in 1980, maintains a critical "Oil for Security" strategic alliance with the United States.
When discussing the global energy landscape, one name looms larger than any other: Saudi Aramco. While Saudi Arabia is frequently discussed in the context of its ambitious efforts to diversify away from oil, the entity funding that very diversification is often overlooked. Aramco is not just a company; it is the economic engine of the Kingdom and the world's largest energy firm.1 With a market capitalization hovering around $1.63 trillion—a figure that eclipses the entire GDP of Saudi Arabia itself—Aramco stands as a financial behemoth. Its valuation at its IPO nearly touched $2 trillion, a sum greater than the combined economies of Indonesia, Malaysia, and Singapore, cementing its status as the undisputed king of oil.
Aramco’s dominance is built on a geological "blessing" that few other nations possess. The company controls some of the world's most prolific assets, including the Ghawar Field, the largest onshore oil field, and Safaniya, the largest offshore field. Together, these reserves allow Aramco to pump between 10 to 12 million barrels per day, accounting for roughly one out of every nine barrels of oil consumed globally. Furthermore, the quality of this oil—"light and sweet"—combined with shallow reservoirs and high natural pressure, allows Aramco to extract crude at a cost of roughly $2 per barrel. This unparalleled efficiency generates net incomes that dwarf those of competitors like ExxonMobil or Shell, making Aramco the most profitable company on the planet.2
However, the origins of this Saudi Arabian giant are deeply rooted in American enterprise. The story began in 1933, when a cash-strapped Saudi Arabia granted a concession to Standard Oil of California (SoCal).3 For years, American geologists struggled to find commercially viable reserves, with failure after failure nearly causing them to abandon the project. It was only in 1938, under the persistence of chief geologist Max Steineke—who urged workers to drill deeper in the Dammam well—that they struck liquid gold. This discovery saved the venture and birthed the Arabian American Oil Company, or Aramco.
As production soared, particularly to meet the demands of post-WWII Europe, the logistical challenges of shipping oil around the Arabian Peninsula led to massive infrastructure projects. In a feat of engineering, Aramco constructed the Trans-Arabian Pipeline (Tapline), stretching 1,200 kilometers to transport oil directly to the Mediterranean.4 For decades, American companies reaped the lion's share of the profits, paying Saudi Arabia only a meager royalty. It wasn't until the geopolitical shifts of the 1970s, specifically after the 1973 oil crisis and the Yom Kippur War, that the Kingdom realized oil was a strategic weapon. By 1980, the Saudi government had completed a full takeover, nationalizing the company and eventually rebranding it as Saudi Aramco in 1988.5
Despite the nationalization, the bond between Saudi Arabia and the United States remains unbreakable, underpinned by an unwritten "Oil for Security" agreement that has persisted for nearly a century. The dynamic is simple yet vital: the US provides military protection and security guarantees to the Kingdom, and in return, Saudi Arabia ensures the stability of global oil prices through Aramco.6 This symbiotic relationship ensures that while the company is Saudi-owned, its strategic operations are inextricably linked to American geopolitical interests.
This relationship is further cemented by deep commercial ties. Many of the mega-projects funded by Aramco continue to rely on American vendors and expertise.7 During the Trump administration alone, dozens of agreements were signed with US firms, ranging from cloud computing partnerships with Amazon Web Services to petrochemical developments with ExxonMobil. Even as Saudi Arabia pushes for localization, the flow of capital and technology between Dhahran and the US remains a two-way street, proving that the "divorce" in 1980 was merely a restructuring of the partnership, not an end to it.
Looking ahead, Aramco faces the dual challenge of sustaining global energy stability while navigating the climate crisis. As global investment in fossil fuels dwindles, Aramco remains one of the few players still spending heavily to guarantee supply, giving it immense bargaining power. Yet, the Kingdom is acutely aware of the need for a "Plan B." By channeling Aramco's massive profits into economic diversification, Saudi Arabia is racing to build a future that survives beyond the age of oil, ensuring that the nation does not fall if the energy transition eventually renders its greatest asset obsolete.