In the Land of Oil, Fears of Excess Use
Comment of the Day

July 13 2012

Commentary by David Fuller

In the Land of Oil, Fears of Excess Use

This is an interesting article from the NYT & IHT. Here is the opening:
LONDON - One of the cooler places to hang out in Saudi Arabia is a motor racing track built among grassy dunes on the outskirts of the capital, Riyadh. Wealthy drivers, including at least one prince, race their Porsches and Lamborghinis there in front of an adoring crowd of young Saudis - some of them wearing reversed baseball caps and baggy jeans.

The twisty circuit is built to the highest specifications and managed with a big emphasis on safety. Still, it is hard not to see the track as emblematic of a Saudi and Gulf culture of lavish and ever-increasing consumption - fast cars, gargantuan shopping malls, grandiose homes - all dependent on abundant and cheap gasoline and electric power. Saudi Arabia's oil use has nearly doubled over the last decade to 2.9 million barrels per day, about a third of what it usually produces.

Saudi oil consumption cannot go on growing this way, a few Cassandras are warning. "It's not sustainable because domestic consumption is growing at an alarming rate. It is going to eventually eat into exports," said Paul Stevens, an energy expert at Chatham House, a research institute in London.

Seeing the dangers of their countries' enormous use of fossil fuels, some Saudi and Gulf energy officials are examining alternatives including solar and nuclear power.


These conundrums are pushing the Saudis and others to think about their energy use. Abu Dhabi has made the largest commitment to alternative energy so far through Masdar, which has received a lot of hype but is taking concrete action. The company is pursuing a range of initiatives, including large solar energy complexes at home and abroad and a research center in a joint venture with the Massachusetts Institute of Technology.

Abu Dhabi has ordered four nuclear plants from South Korea. Not to be outdone, the Saudis are drawing up plans for an even bigger nuclear effort that could add to regional tensions.

The Saudis are also planning to add 41 gigawatts of solar capacity to their grid over the next 20 years. That is an enormous amount, roughly equivalent to Saudi Arabia's entire current power capacity. The goal may not be realistic because the Saudis have close to zero solar power now. But they have hundreds of billions of dollars in the bank to spend. "It is inevitable that we are going to have gigawatts of solar installed," said Sadad Husseini, a former senior executive at Saudi Aramco, the national oil company.

Vahid Fotuhi, head of the emirates' solar industry association, said that sharply falling prices of solar panels were making the sun's energy competitive with fossil fuels.

The easiest way to cut energy use is to raise prices, but most of the Gulf states are reluctant to tamper with the near-giveaway cost of energy that their citizens consider a birthright. If anything, the Arab Spring revolutions have made the rulers even more wary of changing the status quo, no matter how much waste it encourages.

It encourages a lot. Saudi Arabia's filling stations dispense gasoline for about 60 cents per gallon, or 15 cents per liter. Electricity producers pay just $4 per barrel for oil, or about 4 percent of the world price, and 75 cents per million British thermal units for natural gas - a very low price. Not surprisingly, Saudi Arabia uses 10 times as much energy per unit of economic growth as the world average.

A study by Mr. Stevens of Chatham House shows that if "business as usual" continues, Saudi Arabia's oil consumption could actually eat up all its exports by 2038. That, of course, is not the most likely scenario. If nothing else, the Saudis would probably go bust well before because they have few other sources of revenue. But the prospect shows that there are big incentives for the Saudis and other Gulf countries to change their energy-wasting ways.

David Fuller's view Saudi Arabia, Kuwait and Abu Dhabi have few exports other than oil, so to stretch out future income it makes sense for them to develop nuclear and particularly solar power.

This discussion of oil supplies continues in the email immediately below.

Back to top