Energy Shortage is reporting that Saudi Arabia may be facing domestic energy shortages by 2030.  The Arabian kingdom has seen its oil exports decline since 2005 and now is unable to fill the gap in world demand.

 

The Saudi Electricity Company’s (SEC) vice president for relations, Abdul Salam Alyamani, said that in case high crude oil output consumption trends remained the same, in 2030, supply to cover domestic demand would fail, reported Emirates 24/7.

The surge in domestic energy demand raises doubts about whether the kingdom can increase production quickly enough to keep pace. Saudi oil exports have appeared to fall since 2006, despite rising prices. Officials say the kingdom reduced production in response to the global financial crisis, which crimped demand, and it still has plenty of capacity to balance the market if needed.

If Saudi Arabia can’t manage its domestic consumption, the implications for oil-consuming nations such as the U.S. are huge. Because it’s such a huge producer, we all count on its excess capacity to calm the markets and keep crude prices relatively stable.


This comes on the heels of the Wikileaks cables revealing that Saudi petroleum reserves may have been overestimated by as much as 40% and what is left is the heavier, more expensive oil.  The low hanging fruit is nearly gone from the aging Saudi wells, as first predicted in Matt Simmon’s 2005 book, Twilight in the Desert.

In April of this year the Saudi’s announced they are going to spend $100 billion on solar, nuclear and other renewable energy sources.  As one commentator asked:

 

…the country with the largest readily available oil reserves in the world is suddenly considering spending $100 billion on alternative energy so they will have more oil to export. Does that strike anyone else as strange? Wouldn’t it be a lot cheaper to just punch a few more wells and produce more oil from the billions of barrels they have in reserves….The only obvious answer is that they don’t have that capacity. (Jim Brown, Signs of Saudi Production Struggle)


Saudi Arabia’s oil problem clearly stems from its enormous population growth.  In 1973 at the time of the first “oil crisis”, its population was about 6 million.  As of 2010 it had exploded to 25 million (larger than Australia’s 22 million and approaching Canada’s 34 million). Its population is  projected to reach 27 million in 2015 and 32 million in 2025.

The kingdom in the desert is the largest oil consuming nation in the middle east.  It consumes 30% of its oil production and much of that is to buy food and generate electricity. Essentially Saudi Arabia has been trading oil for food and a more valuable form of energy. No wonder that it has been forced to export less oil and those exports have declined almost 20% since 2005.

The take from all of this: the country’s rising energy consumption levels will greatly impact its ability to export crude oil at the level to which oil consuming regions like the United States and Asia have grown accustomed.  Unless massive reserves of light oil are discovered close to the surface to replace Saudi oil, we are left with the very high cost heavy and hard to reach oil on the planet (e.g. Canadian oil sands, the South Atlantic Ocean off Brazil, the Arctic).  Using that oil will quickly translate into higher transportation and food prices and lower standards of living unless viable alternatives for transportation are found.

Read more on Saudi Arabia’s oil predicament here (Energy Trends on Saudi oil consumption trends) and here (Jeff Rubin, Why Saudi Arabia can no longer temper oil prices),  here (Wall Street Journal, Rising Saudi Thirst For Oil Drives Plans to Go Nuclear) and here (UPI, Saudi Clout on Oil Questioned After OPEC)

 

 

 

 



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1 Comment on Saudi Arabia Running Out of Oil To Export?

  1. Cathleen says:

    How could any of this be better stated? It couldn’t.