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Page added on July 29, 2013
Saudi Prince Alwaleed warns against falling oil demand
Saudi billionaire Prince Alwaleed bin Talal warned that the Gulf Arab kingdom needed to reduce its reliance on crude oil and diversify its revenues, as rising U.S. shale energy supplies cut global demand for its oil.
In an open letter to Oil Minister Ali al-Naimi and other ministers, published on Sunday via his Twitter account, Prince Alwaleed said demand for oil from OPEC member states was “in continuous decline”.
He said Saudi Arabia’s heavy dependence on oil was “a truth that has really become a source of worry for many”, and that the world’s biggest crude oil exporter should implement “swift measures” to diversify its economy.
Prince Alwaleed, owner of international investment firm Kingdom Holding, is unusually outspoken for a top Saudi businessman.
But his warning reflects growing concern in private among many Saudis about the long-term impact of shale technology, which is allowing the United States and Canada to tap unconventional oil deposits which they could not reach just a few years ago. Some analysts think this may push demand for Saudi oil, as well as global oil prices, down sharply over the next decade.
Over the past couple of years the Saudi government has taken some initial steps to develop the economy beyond oil – for example, liberalising the aviation sector and providing finance to small, entrepreneurial firms in the services and technology sectors.
Naimi said publicly in Vienna in May that he was not concerned about rising U.S. shale oil supplies. Prince Alwaleed told Naimi in his open letter, which was dated May 13 this year, that he disagreed with him.
“Our country is facing a threat with the continuation of its near-complete reliance on oil, especially as 92 percent of the budget for this year depends on oil,” Prince Alwaleed said.
“It is necessary to diversify sources of revenue, establish a clear vision for that and start implementing it immediately,” he said, adding that the country should move ahead with plans for nuclear and solar energy production to cut local consumption of oil.
The shale oil threat means Saudi Arabia will not be able to raise its production capacity to 15 million barrels of oil per day, Prince Alwaleed argued. Current capacity is about 12.5 million bpd; a few years ago the country planned to increase capacity to 15 million bpd, but then put the plan on hold after the global financial crisis.
While most Saudi officials have in public insisted they are not worried by the shale threat, the Organization of the Petroleum Exporting Countries (OPEC) has recognised that it needs to address the issue.
In a report this month, OPEC forecast demand for its oil in 2014 would average 29.61 million bpd, down 250,000 bpd from 2013. It cited rising non-OPEC supply, especially from the United States.
At its last meeting in Vienna in May, OPEC oil ministers spent time discussing shale technology and set up a committee to study it.
9 Comments on "Saudi Prince Alwaleed warns against falling oil demand"
Arthur on Mon, 29th Jul 2013 11:39 am
Saudi-Arabia has had more than enough money during the past decades when western countries were so kind so actually pay for the oil, the Saudi’s alone would never have been able to pump up and process themselves. It is time for them to plan for the future if they aspire for anything else than being a camel driver again. Investing in a solar economy would be a good start as well as firing all those ‘princes’. And stop funding fundamentalists all over the world.
Falling demand for oil is good news for all involved.
TIKIMAN on Mon, 29th Jul 2013 12:13 pm
“Falling demand for oil is good news for all involved”
Not true.
A fall in demand means less economic output. More electric cars, renewable energy will never lessen the demand for oil. The only way oil consumption will go down is when oil production actually starts the long slide down the slope.
BillT on Mon, 29th Jul 2013 12:16 pm
They are still pushing the idea that they can actually increase their oil output … lol. Not that anyone with two brain cells functioning, believes it.
As for shale oil fraking … I don’t think they have anything to worry about, but they started too late to actually replace hydrocarbon energy with ‘renewables’. The war is going to take out most of their production long before.
GregT on Mon, 29th Jul 2013 3:27 pm
Oil prices have historically been between 20 and 30 dollars a barrel. The Suadis could cut exports by 2/3rds and still enjoy the same income as they did 6 years ago. Better to leave the excess in the ground for now, it will be worth far more in the future, than what it is today.
Arthur on Mon, 29th Jul 2013 5:30 pm
” Better to leave the excess in the ground for now, it will be worth far more in the future, than what it is today.”
Maybe in the midterm, but not in the longterm. In thirty-forty years time the greasy stinking stuff will no longer be that much in demand anymore.
energy investor on Mon, 29th Jul 2013 9:29 pm
Hmmm,
BillT, for a change I disagree because the Saudis can turn the tap on new fields if they feel the need. However they know that there are three fields approaching death including Ghawar, so their game plan will include holding back as much as possible for the future.
The Saudi/OPEC game plan is based on the fact that most countries live in sandpits and will always be reliant on oil, so they must husband it. In that regard, we in the OECD only think about the oil we need.
Right now the Saudis are concerned going forward to replace oil used in power generation so it too can be available for export.
Their priorities are clearly different to our own.
There are several Saudi princes who have been spooked by the hype and hoopla of American shale. But al Naimi just smiles, wishes America well and tells them to take hike, knowing he is doing what King Abdullah has mandated.
moli on Tue, 30th Jul 2013 12:56 am
lol. . . ppl on here think saudi have a say in regard to oil. . lol
arthur . . really? greasy stinking stuff no value ? when its driven the global growth over the last 100 years. . energy will always have value . . the loss of it will carry consequences.
BillT on Tue, 30th Jul 2013 1:42 am
Energy investor, your name gives your mindset away. Sorry. They cannot ‘turn on’ anything except propaganda.
moli, Arthur is deep into the techie religion and cannot accept that tech is NOT the answer to everything.
Arthur on Tue, 30th Jul 2013 11:28 am
“arthur . . really? greasy stinking stuff no value ? when its driven the global growth over the last 100 years. . energy will always have value . . the loss of it will carry consequences.”
Yeah, there has been a time when stones and salt were all the rage.
“Arthur is deep into the techie religion and cannot accept that tech is NOT the answer to everything.”
Well, maybe not the answer to everything, but tech is certainly the only answer to energy problems.
What do you suggest… praying?
We all agree that at some point all fossil will be burned up. Every year the sun sends us energy in an amount bigger than all cumulated fossil fuel reserves in history:
http://deepresource.files.wordpress.com/2013/06/renewable-energy-reserves.png
What we need to do is turn the switch in our heads and exploit that energy. The potential is there.