Christopher Helman writes: The idea that Saudi Arabia could become an oil importer by 2030 is laughable. But that’s the scenario outlined in a report this week by Citigroup analyst Heidy Rehman. Looking at the Kingdom’s growth in power demand (much of which is generated by burning oil), Saudi Arabia’s domestic demand is on track to suck up ever more of its oil production to the point that there’s nothing left for export.
That sounds hard to believe given that the Kingdom produced 9.9 million bpd last month, the most in the world, and more than 10% of global demand. But developing countries usually grow electricity demand faster than population growth, and in Saudi Arabia air conditioning is not an option. Compounding the problem, writes Rehman is that Saudi power generators only pay $5 to $15 per barrel for the oil they burn.
To assuage civic unrest in the wake of the Arab Spring, Saudi King Abdullah has granted his 30 million subjects a host of new social handouts. He’s not about to yank subsidized electricity or gasoline now — but eventually it will probably have to happen.
It’s unlikely that by the time the Saudis need to import oil that there would be enough available on global markets to meet their needs. What’s more, considering that the $600 billion Saudi economy is based almost entirely on energy exports, if the Kingdom were to be able to afford to buy oil from the rest of the world it would have to sufficiently diversify to the point that it made enough other products for export that it could offset its oil import bill. This is highly unlikely for a country with no tradition of entrepreneurship, few rights for women and a reliance on indentured laborers brought in from the likes of Sri Lanka and Malaysia to do any kind of manual labor.
Rather if the Saudis are going to be able to make their energy ends meet in the decades to come they will have to rely on gleaning a different kind of energy out of the desert: solar power. [Continue reading…]