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PHASING OUT SUBSIDIES ‘NOT EASY’

Mideast facing ‘double dilemma’ over oil future

Manama, May 16, 2013

The Middle East is facing a double dilemma over the global competitiveness for oil in the future, said experts at a panel discussion held by the International Institute for Strategic Studies (IISS) - Middle East in Bahrain.

On the one hand, it has to look to increase production and reduce the amount of hydrocarbons it produces while diversifying local economies.

On the other hand, while demand is likely to rise from developing economies, traditional consumers like the US have increased their own production in recent years while reducing consumption.

"The problem for producers in the region is that because they subsidise local consumption, regional consumption is extremely high," former senior adviser to Saudi Arabia's Minister for Petroleum and Mineral Resources Dr Mohammed Al Saban was quoted as saying by our sister publication, the Gulf Daily News.

"In Saudi Arabia, in spite of being the largest exporter of oil, consumes some four million barrels a day. This is largely down to subsidies and a lack of public transport," he added.

"The government is looking at ways of phasing out subsidies, but this is not an easy issue," he said.

"It is also looking to develop a public transportation system which will reduce local demand for oil and is also keen to develop solar energy. But in the longer term, we need to move away from a dependence on hydrocarbons and develop a knowledge-based economy," he added.

While the West is increasing its hydrocarbon production after a period of decline, the Middle East is increasing its consumption, according to nogaholding's chief executive Shaikh Mohammed bin Khalifa Al Khalifa.

"We face a position where there could be supply constraints while demand will continue to grow," he said.

"It is not clear what will happen in the future but we are seeing increased production from sources like shale oil in the US and here in Bahrain, and elsewhere in the region we are looking to increase resources by deep drilling for gas," he added.

IISS senior fellow for economic and energy security Dr Pierre Noel argued that while in some areas of the West like the US, production had increased and consumption was being reduced that even a minor increase in demands from developing economies like China and India could have major issues for the balance between supply and demand. - TradeArabia News Service




Tags: Middle East | oil production | Subsidies | IISS | hydrocarbons |

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