Kippreport investigates if oil prices aren’t the only cause for the market slumpAugust 27, 2015 12:00
The Gulf’s known unknown
We all know the oil is running out. But the GCC is struggling to devise a collective approach to energy security for the future, reports Trends magazine.
February 7, 2010 5:12 by Edmund Sheen
The region is focusing on the production of electricity as being the only industry that has major prospects for switching fuels. According to the director of Middle East and Africa research at IHS Cambridge Energy Research Associates, Leila Ben Ali, natural gas – and hydrocarbons in general – should continue to play a leading role but the region will also need to introduce alternatives. “Even if the Gulf’s share of the energy mix is limited, the development of green initiatives such as renewable and nuclear power depends on strategic choices which could have important implications,” she says, adding that gas is a major part of the fuel mix.
According to Ben Ali, the energy mix will have to be tested against the sustainability of the economic development path of GCC countries. “The guiding hypothesis is that natural resources depletion should be offset by manufactured and human capital increase.
“Emerging conclusions show that, under specific conditions, major hydrocarbon exporters with energy-intensive industrial orientations could be building genuine wealth for the future, even if domestic fuel prices continue to be below market rates,” Ben Ali says.
But she does not appear to back renewables merely for the sake of looking ‘green’. “If there are strategic benefits linked to renewables, of course. But we also have to take into account all the financial aspects that are linked to renewables,” she says.
According to Ben Ali, if a country is ready to put money behind such a thing and continuously support renewables, then it’s fine. “But all countries cannot do that. So it is important to be realistic about what could be achieved and put the resources behind it.”
Until that balance is found, the region will have to rely upon its rich fossil fuel reserves to ride out the storm. All while listening to warnings they’ve heard before: “Oil is not really cheap and will ultimately become more and more expensive. It is also a finite resource which will run out in the not-too-distant future,” Philips’ Hakim says.