Academic journal article The Journal of Social, Political, and Economic Studies

Will Saudi Arabia Face an Energy Crisis?

Academic journal article The Journal of Social, Political, and Economic Studies

Will Saudi Arabia Face an Energy Crisis?

Article excerpt

Saudi Arabia holds the world' s largest proven oil reserves and the fourth-largest natural gas reserves. Despite these massive hydrocarbon deposits, the kingdom has launched ambitious plans to build nuclear reactors and to utilize solar power. This essay examines the reasons behind these initiatives and the efforts to establish the necessary technological infrastructure to implement them. This article argues that developing alternative energy resources is not enough to improve the nation's energy outlook, and that the Saudi authority needs to address the alarming surge in domestic consumption.

Key Words: Saudi Arabia energy; Solar power; Nuclear power; Alternative energy development; Efficiency.

For decades some energy analysts have claimed that Saudi Arabia's oil production has peaked and started declining. Matthew R. Simmons' book, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy (Wiley, 2005) was a clear representative of this line of analysis. These arguments and predictions, however, have been proven pessimistic and inaccurate. In 2010 the kingdom produced more than 10 million barrels per day (b/d), 12 percent of the world's total production.1 In other words, Saudi Arabia was the world's second largest oil producer after Russia (which has 12.9 percent of world's total). These figures are a bit misleading. The fact is that with 5.6 percent of the world's proven reserves, Russia seems to be fast depleting its oil deposits. Meanwhile, Saudi Arabia holds the world's largest proven reserves (19.1 percent), which means that the kingdom will remain a top oil producer much longer than Russia. Furthermore, the International Energy Agency and the Energy Information Administration, among others, project that a growing share of the world's demand for oil in the coming decades will be met by Persian Gulf producers, led by Saudi Arabia. Finally, since the late 2000s, the kingdom has maintained the world's largest spare capacity. This large capacity gives Riyadh a leading role in stabilizing global oil markets in time of natural or political crises.

This rosy picture, however, does not tell the whole story. True, the kingdom is blessed with abundant hydrocarbon deposits, but these oil and gas deposits are not infinite. Another important side of the energy equation is the rapid rising Saudi oil consumption. In 2000 the kingdom consumed approximately 1.5 million b/d. Ten years later, it consumed about 2.8 million b/d. In other words, the country's consumption almost doubled within a decade. This trend has significant domestic and international ramifications. Simply stated, more domestic consumption means less oil available for export. Currently Saudi Arabia consumes approximately 23 percent of its oil production and 32 percent of its export. Oil revenues provide the backbone of the country's national income. Diminishing revenues would lead to economic stagnation and weaken domestic social and political stability. On the other hand, despite all the efforts to diversify the energy mix, the world still runs on oil and Saudi Arabia is the leading player. Less Saudi oil would push prices higher and deal a heavy blow to the fragile global economy.

The good news is that this bleak scenario is not imminent. There is a small window of opportunity where this trend can be reversed. Equally important, the Saudi leaders seem to be aware of the challenge facing their nation and the necessity to take drastic actions to articulate and implement appropriate strategies. Ali al-Naimi, Minister of Oil, argues that using alternative sources of energy that are reliable and sustainable will free more oil for export and "reduce dependence on hydrocarbon resources and keep them as a source of income for a longer period."2

This essay will examine Saudi Arabia's efforts to diversify its energy mix away from oil and to utilize alternative energy resources, mainly nuclear and renewable power. Several other countries in the Middle East (and elsewhere) are pursuing similar strategies. …

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