A new revolution in the Middle East – the world is thinking

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Posted in: Saturday 24 July 2021 – 6:30 PM | م Last update: Saturday 24 July 2021 – 6:30 PM:30

The Center for Strategic and International Studies has published an article by John Alterman, in which he deals with the impact of the global transformation of renewable energy on the countries of the Middle East… We present the following:
Global energy transitions are approaching, as awareness of climate change spreads and consumers and governments are urged to abandon hydrocarbon energy. The financial world felt this shift and moved away from oil and gas, investors began to pump billions into renewable energy sources, and China realized that renewable energy was a necessity for its national security. Soon, oil production will exceed demand, and as prices fall, producers will produce more oil to compensate for the loss, and oil prices will plummet.
There is an opinion that the energy transition will take decades, and the hydrocarbon infrastructure will ensure a strong market for many years. With all the attention electric cars are getting, 90% of car production is still off oil and homes still rely on gas stoves and ovens. Almost all of the world’s jet fuel is based on petroleum, and the world is becoming more and more dependent on petroleum-derived plastics. If we look at the developing world, where most of the world’s population lives, we will find that their consumption increases with increasing income, and those countries are likely to rely on existing technologies and equipment for a long time. While the wealthy can afford to spend on a green economy, fuel will still be available and affordable for much of the world’s population.
Both views are supported by reasonable arguments, and no one can be certain about the fate of technology, laws, or patterns of consumption. But these shifts may be particularly important for the Middle East. Oil and gas revenues drive the region’s economy; The region consists almost entirely of energy or labor exporting countries. Poor countries send workers to rich countries, and workers send billions back to their countries and families… The global strategic interest in the region depends on energy production. While religion and tourism in the region will remain in the minds of peoples, for governments, the importance of the region comes from its energy.
The idea that oil prices will drop dramatically is because oil has a market, and small imbalances have big consequences. Today, global oil consumption is about 100 million barrels per day, and there is relatively little capacity to produce more. When consumption threatened to outpace supply in 2008, oil reached $140 a barrel. When the Corona pandemic curbed demand in the spring of 2020, the world began to run out of stocks, and oil prices fell. Saudi Arabia took the biggest hit, cutting production by about 20 percent while prices continued to fall below $30 a barrel.
Any continuous decline in global consumption, regardless of its size, would put pressure on the Gulf countries to increase production in an attempt to remove high-cost oil producers from the market and establish their control over the market, even if the price of a barrel of oil decreased or consumption decreased further.
We do not know who will be the winners and losers in the next decade in the Middle East. Increased production of low-cost oil may offset lower prices, and restore strategic focus to Middle Eastern producers. Or the responsibility for controlling the market could fall to producers in the Middle East, who would need to restrict production to prevent prices from collapsing.
All governments in the Middle East have tried to prepare for a world with the dimension of oil, but they are still far from their goals. In the Gulf countries, the transition from a stage of high productivity with low wages of workers to a stage of low productivity with high wages will take time. The private sector is struggling to provide opportunities for the new workforce, with an unemployment rate of over 30% in some Gulf countries. The feeling of alienation among young people is a problem that Arab governments have suffered from since the events of the Arab Spring, and none of the governments have dealt with it in a radical way.
Energy shifts are important to players outside the Middle East. China’s keenness to achieve its energy security leads many investments in the region. If the Chinese government decides that its energy security depends on Africa’s mines and not on wells in the Middle East, we should expect a shift in China’s interests and capital. If oil and gas continues to play a major role in the global energy game, more US-Chinese competition for influence in the region is likely to occur. It is possible for Western countries to move away from hydrocarbons for environmental reasons, while China and the developing world remain dependent on them for economic reasons. This may manifest itself in the form of the United States relinquishing its future role in the Middle East, while China attempts to fill the void.
What is important here is the question about the ability of Middle Eastern governments to deal with these developments? The main drivers of the global energy transition come from outside the region, and it will have significant impacts on the region and on the region’s relations with the rest of the world.

Prepared by: Ibtihal Ahmed Abdelghani
original text over here







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