Analysis. “Twilight in the Desert”. Under this title (twilight in the desert, in English) published by an American oil banker, Matthew Simmons an explosive book in 2005. He asserted that Saudi Arabia had overestimated its black gold reserves and predicted its impending demise. The claim has never been proven and fifteen years later the Wahhabi Kingdom remains the second largest producer of black gold on the planet, its first exporter and the only country capable of injecting or withdrawing crude oil to balance the market and learn lessons .
For how much longer ? Although production is near pre-Covid-19 levels and will continue to grow this decade, the world has already entered the post-oil era. The movement is accelerating and for the countries that thrive on it, the challenge now is to manage this transition and monetize their precious resources as best or even as quickly as possible.
In early July, the open crisis between Riyadh and Abu Dhabi within the Organization of the Petroleum Exporting Countries (OPEC) showed that the management of oil revenues could divide two states that were once very close and had gone so far as to negotiate a political union. By demanding – and enforcing – that their quota within the cartel be greatly increased (from 3.2 to 3.8 million barrels per day), the Emirates have signaled that they expect a fair and quick return on the huge investment which aim to increase their daily production to 5 million barrels in 2030. A windfall designed to decontaminate oil and fund new activities.
For twenty years, the rise in crude oil prices has greatly enriched the petromonarchies. This blessed time is coming to an end. The devastating effects of global warming and the ecological transition being initiated by industrialized countries condemn fossil fuels. Oil-producing countries are increasingly worried about the future of their income, now convinced to conserve oil “for future generations” – Strategy that Riyadh has long defended – is no longer relevant.
Under the rule of Crown Prince Mohammed Ben Salman, aka “MBS”, Saudi Arabia has started this transition. She gradually loosens the religious shackles and is opening up as part of its “Vision 2030” strategy, which it launched five years ago. But it remains more dependent on hydrocarbons (42% of its GDP) than its UAE neighbor (30%), which is committed to funding both social stability and economic diversification. Sclerosing bureaucracy and Wahhabi austerity still prevent a number of companies from establishing their headquarters there. The World Bank ranked it 62nd in 2020and Ranking of countries that prefer “business” far behind the Emirates (16thand).
You still have 52.08% of this article to read. The following is for subscribers only.