Saudi Arabia is looking inward to cut its own domestic oil and gas consumption, after failing over the weekend to broker a deal among top producers to curb drilling.
The eve before top producers met in Doha, Qatar, to discuss freezing production to address an ongoing oil-supply glut, Saudi Arabia announced it reached a crisis point in terms of its own domestic consumption of oil and gas and needs to cut back.
The recently created Saudi Center for Energy Efficiency said the country now consumes 38 percent of “total Saudi production of oil and gas products,” according to the Saudi Press Agency, the kingdom’s official government news service.
It’s a significant change that would shift the bulk of the oil-rich kingdom’s production away from sales abroad to support domestic demand. It’s an interesting dilemma for a country that uses its oil wealth as its primary revenue source.
“This growing consumption is a result of … rapid economic and population growth, during the past 20 years, which led to a rise in domestic energy consumption to very high rates, causing an increase in energy waste,” the press agency said.
The country expects consumption to double by 2030, which is unacceptable. The kingdom says it has become a top issue for a special program to “rationalize” energy waste, working with 30 agencies to combat rising energy use.
“Continued growth of this annual consumption rate of between 4-5 percent in the coming years, will double the current level by the year 2030, unless measures to rationalize, raise the efficiency of consumption and improve production efficiency, are taken and applied,” the press agency said.
The energy efficiency push was announced ahead of President Obama’s visit on Wednesday to meet with Saudi King Salman bin Abdul-Aziz Al Saud. The talks will address a broad range of issues, which are likely to include climate change, as the president has made it a top issue in all talks with foreign leaders.
The Saudi efficiency plan is the latest step it has taken to reduce oil and gas consumption, and hence greenhouse gas emissions, which likely will receive some praise from the White House.
The Saudi plan comes as countries converge on United Nations headquarters in New York on Friday to sign December’s Paris climate change accord, which seeks to put nations on track to reduce fossil fuel consumption to stop the Earth’s temperature from rising above 2 degrees Celsius mid the mid-part of the century.
Meanwhile, the low cost of crude oil is hurting countries such as Saudi Arabia, which have seen their income for oil exports cut in half in the last year.
The low price of oil led the country’s credit rating to be cut for the second time last week.
Saudi Arabia tried to lead countries out of the supply glut by trying to reach a deal among leading producers to reduce production to no avail on Sunday.
The idea was to reduce production to force prices up. But Iran wouldn’t agree, which Saudi Arabia said was contingent on it agreeing to a freeze, brought negotiations to an end.
