The stone age didn’t end because they ran out of stones.
Watching the falling oil prices has been fascinating. Saudi Arabia has clearly been at the heart of the continued high production that is driving it, but it’s never been clear to me why they would want to, effectively, reduce their income and deplete a finite resource.
There are the various and machiavellian political theories of course – Syria and Russia loom large in these, but really? As a main driver of such a seismic shift in policy? I’ve never really been convinced.
An article in the Energy Post had a fresh and, I thought, much more convincing take on what Saudi is up to. The author, Elias Hinckley, a strategic advisor on energy finance and energy policy writes that:
“Saudi Arabia is seeing a new and massively changing energy landscape. The U.S. and China have agreed to bilateral carbon reduction targets. 2014 is now officially the hottest year recorded in human history, a record set almost impossibly without the presence of El Nino. And on January 7 a report released in Nature lays bare the fossil fuel climate change equation by concluding that to achieve anything better than a 50/50 shot at keeping global warming under 2 degrees centigrade (the most widely accepted threshold for avoiding catastrophic climate change) 82% of fossil reserves must remain in the ground. That report puts hard numbers on the percentages of fossil fuels that must “stay in the ground” and calls for 38% of proven Mideast oil reserves to never to be pumped from the ground. That 38% represents some 260 billion barrels of oil – worth tens of trillions of dollars – much of that not held in Saudi reserves.”
Renewables are gaining ground – they are growing cheaper and more efficient so that there is less need for oil. It won’t be so hard, in the near future to achieve consensus about leaving the oil in the ground.
As Sheik Yamani – a former Saudi Oil Minister said in 2000:
Thirty years from now there will be a huge amount of oil – and no buyers. Oil will be left in the ground. The Stone Age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil.”
Saudi oil is accessible, cheap to pump and they have a lot of it. They have no other significant source of income so why not pump it out and sell it – even at a seriously discounted price – while they can sell it at all.
As Hinckley says:
‘The owner of the most valuable fossil fuel reserve on Earth just started discounting for a future without fossil fuels. While they would never state this reasoning publicly, their actions speak on their behalf. And that changes everything.’
Worth a read.