Saudis want aid if world cuts oil use
Let’s call it The Audacity of hOPEC. AP reported last week:
Saudi Arabia has led a quiet campaign during these and other negotiations — demanding behind closed doors that oil-producing nations get special financial assistance if a new climate pact calls for substantial reductions in the use of fossil fuels.
That campaign comes despite an International Energy Agency report released this week showing that OPEC revenues would still increase $23 trillion between 2008 and 2030 — a fourfold increase compared to the period from 1985 to 2007 — if countries agree to significantly slash emissions and thereby cut their use of oil.
The hypocritical chutzpah is staggering. The head of the Saudi delegation Mohammad S. Al Sabban said:
We are among the economically vulnerable countries….
Many politicians in the Western world think these climate change negotiations and the new agreement will provide them with a golden opportunity to reduce their dependence on imported oil…. That means you will transfer the burden to developing countries, especially to those highly dependent on the exploitation of oil.
First off, for decades now, Saudi Arabia has led the Organization of the Petroleum Exporting Countries in using monopoly practices to keep oil prices higher than they would have been under strict market economics. This caused pain for developed countries like ours, but hardly as much, relatively speaking, as that suffered by the non-oil-producing developing (i.e. poor) countries. I don’t remember Saudi Arabia commenting on the burden that cartel-driven oil prices created for other developing countries.
Second, the Saudi logic about the future impact of a climate deal is exactly backwards from the broad perspective of the burden of all developing countries. If the rich countries reduce their oil consumption, that will necessarily reduce the price of oil compared to what it would have otherwise been.
The head of the Saudi delegation Mohammad S. Al Sabban dismissed the IEA figures as “biased” and said OPEC’s own calculations showed that Saudi Arabia would lose $19 billion a year starting in 2012 under a new climate pact. The region would lose much more, he said.
That is an old study by Charles River, which has done lots of dubious climate analysis for the fossil fuel industry.
In fact, the Saudis will probably be making $200+ billion a year in 2012 from oil sales, and a little climate will not have any noticeable impact on oil consumption by then. Moreover, peak oil is going to drive up prices and reduce demand faster than any climate deal (see World’s top energy economist warns peak oil threatens recovery, urges immediate action: “We have to leave oil before oil leaves us”).
Many inside and outside the Arab world were having none of the Saudis nonsensical, special pleading:
An Arab environmental group IndyACT and the environmental group Germanwatch released a report Thursday accusing Saudi Arabia of blocking key elements of the negotiations. Among their tactics, the groups said, was slowing negotiations by insisting that the economic woes of oil producers be included in the text.
“Despite the variability in the region, the current Arab position is mainly focused around protecting the oil trade rather than saving the planet form the adverse impacts of climate change,” said Wael Hmaidan, the executive director of IndyACT.
The NYT reports:
Petroleum exporters have long used delaying tactics during climate talks. They view any attempt to reduce carbon dioxide emissions by developed countries as a menace to their economies….
“It is like the tobacco industry asking for compensation for lost revenues as a part of a settlement to address the health risks of smoking,” said Jake Schmidt, the international climate policy director at the Natural Resources Defense Council. “The worst of this racket is that they have held up progress on supporting adaptation funding for the most vulnerable for years because of this demand.”
Saudi Arabia is highly dependent on oil exports, which account for most of the government’s budget. Last year, when prices peaked, the kingdom’s oil revenue swelled by 37 percent, to $281 billion, according to Jadwa Investment, a Saudi bank. That was more than four times the 2002 level. At one point in 2008, the average gasoline price in the United States surpassed $4 a gallon.
Saudi exports are expected to drop to $115 billion this year, after oil prices fell. American gasoline prices are hovering around $2.50 a gallon.
The one-year swing in the kingdom’s revenues shows that oil prices are likely to be a bigger factor in Saudi Arabia’s future that any restrictions on greenhouse gases, said David G. Victor, an energy expert at the University of California, San Diego.
Mr. Victor dismissed the Saudi stance as a stunt, saying that the real threat for petroleum exporters came from improvements in fuel economy and rising mandates for alternative fuels in the transportation sector, both of which would reduce the need for petroleum products. “Oil exporters have always, in my view, far overblown the near-term effects of carbon limits on demand for their products,” Mr. Victor said. “For the Saudis this may be a deal-breaker, but the Saudis are not essential players. In some sense, one sign that a climate agreement is effective is that big hydrocarbon exporters hate it.”