In a business and climate conference on Thursday, Saudi Arabian Oil Minister Ali al-Naimi ruled out the possibility of reducing reliance on fossil fuels in the short run. In recent times, environmentalists have expressed concerns regarding carbon emissions and are hence urging companies to use more environmental-friendly forms of energy.
According to Mr. Naimi, transitioning from fossil fuels to alternative energy right now does not make much economic sense. Speaking to the Wall Street Journal, he stated: “You say decarbonize. Are you willing to have me go back home and shut all the oil wells? Can you afford that today? What will happen to the [oil] price if today I remove 10 million barrels per day of the market.”
Mr. Naimi indicated that with substantial developments in technology, renewable forms of energy -such as solar energy- would become more competitive, but in the long run. He also argued that Asian and African markets are not yet ready for this transition.
The ramped up crude production from US shale drilling, and the Organization of Petroleum Exporting Countries’ (OPEC) decision to maintain output at 30 million barrels per day, caused crude prices to plunge more than 50% in the second half of last year. On Friday, the US benchmark for crude at around 5:31 AM EDT was down 0.56% at $60.38 per barrel, while Brent was down 0.71% at $66.07 per barrel.
While Saudi Arabia has massive crude oil reserves, Mr. Naimi indicated the possibility of the country reverting towards solar and wind energy in the long run. As reported by the Financial Times, Mr.Naimi said: “In Saudi Arabia, we recognize that eventually, one of these days, we are not going to need fossil fuels. I don’t know when, in 2040, 2050 or thereafter.”
Saudi Arabia currently consumes 10 million barrels of oil per day, which is 25% of the global crude oil production. Its consumption alone is greater than the total US oil production. The major demand for Saudi Arabia’s crude oil has led analysts at Citigroup to believe the company will become a net importer of crude oil by 2030. The country is thus aiming to broaden its horizon and start exporting fossil fuels in the coming years.
Currently, for renewable forms of energy to become a success would be a great challenge. According to the Financial Times, around one billion people worldwide do not have access to electricity, so strong demand for fossil fuels is expected to exist. Mr. Naimi believes a lot more work needs to be put in place to ensure fossil fuels are burnt in a more eco-friendly way.
Although Saudi Arabia has undertaken major solar-powered projects in the past, there are concerns that the recent plunge in crude oil prices will remain unattractive. However, Mr. Naimi has dismissed these concerns, and claims solar energy to be more feasible and economic despite the downward trend in the crude oil prices.
Nike Stern, author of the 2006 UK government report, shares Mr. Naimi’s view that adopting renewable energy would take a long time. He said each country individually would have to undertake operations to ramp up their climate actions in the future.