February 20, 2012

How long can we live on 12–16 cents a liter for gasoline?

Arab news

How long can we live on 12–16 cents a liter for gasoline?


I have just finished reading “The Hidden Energy Crisis in Saudi Arabia Report” prepared by Chatham House, The Royal Institute of International Affairs, an independent body which promotes the rigorous study of international questions.

First I want to confess that we probably rank on top of the list of countries wasting valuable resources and causing excessive pollution. How long can we live on 12–16 cents a liter for gasoline?

Frankly speaking we need to cut down on unrestrained domestic fuel consumption at all levels. We need to realize that our economy is dominated by fossil fuels, the only products we export are oil and some petrochemicals.

Chatham report explains why the need for change is urgent, and what options and challenges we face in trying to address the politically sensitive issue of domestic energy prices.

The report emphasizes the notion that our domestic energy consumption could limit our exports of oil within a decade.

Is this a shocking statement or what? We need to recognize that over 80 percent of our national expenditure depends on oil revenues. We need to realize that reviving a plan from 2008 to restore production at the mothballed fields is good but not the solution.

We need to recognize that historically, we had the luxury of low energy prices mainly due to unsustainable and uncontrolled consumption. The report addresses the fact that in 1992, Saudi Arabia was one of the signatories of the UN’s Agenda 21, which committed countries to developing policies to address unsustainable patterns of consumption, including energy. Well, are we?

We have the choice of analyzing the data in the report, or continue to act as there are no compelling reasons to act on both energy consumption and price. More important, we need to realize the need to develop a plan for post-oil economy. Pumping 9.65 million barrels a day in January is good, but how does that help future generations?

We have been successful in adding new energy supply, but is this enough? Chatham report simulations show that “adding renewable and nuclear power based on current estimates will only delay the onset of an intractable fiscal deficit by a couple of years.”

There is no doubt in my mind that we need to increase energy efficiency and lower our economy’s dependence on income from oil exports. In fact, we’re running out of time.

Does this mean we need to look again at the price of energy? Why not? There’s no doubt that certain groups as well as the poor currently benefit from the status quo, there’s also no doubt that raising prices would be met by strong opposition.

We need to recognize that there are many challenges ahead of us. How do we do it? How do we prepare the society to accept higher energy prices? The report suggests that this could be achieved by “public education campaigns and mechanisms to offset the higher costs for the most affected consumers need to be well thought out and planned for the long term.”

Would this be painful? Of course it would, but if we are serious about providing for future generations we need to start acting now.

Finally, the report suggests various recommendations including developing ambitious but realistic energy intensity targets and a program of measures to achieve them, mandating and enforcing regulation such as building and enforcing appliance standards for existing as well as new construction and installation.

We also need to prepare the public for energy pricing reforms through investment in a range of efficiency and implement a package of measures that increase private-sector employment for Saudi nationals, such as public–private partnerships to adapt infrastructure, and introduce efficiency-enhancing technologies.

Tweet: Diversification does not necessarily mean increasing supply of the same product.


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