Supply was only half the calculus, though. While the new Saudi stance was being trumpeted as a war on shale, Naimi’s not-so-invisible hand pushing
prices lower also addressed an even deeper Saudi fear: flagging long-term demand. Naimi and other Saudi leaders have worried for years that climate
change and high crude prices will boost energy efficiency, encourage renewables, and accelerate a switch to alternative fuels such as natural gas,
especially in the emerging markets that they count on for growth. They see how demand for the commodity that’s created the kingdom’s enormous
wealth—and is still abundant beneath the desert sands—may be nearing its peak. This isn’t something the petroleum minister discusses in depth in
public, given global concern about carbon emissions and efforts to reduce reliance on fossil fuels. But Naimi acknowledges the trend. “Demand will
peak way ahead of supply,” he told reporters in Qatar three years ago. If growth in oil consumption flattens out too soon, the transition could be
wrenching for Saudi Arabia, which gets almost half its gross domestic product from oil exports. Last week, in a speech in Riyadh, Naimi said Saudi
Arabia would stand “firmly and resolutely” with others who oppose any attempt to marginalize oil consumption. “There are those who are trying to reach
international agreements to limit the use of fossil fuel, and that will damage the interests of oil producers in the long-term,” he said. U.S.
State Department cables released by WikiLeaks show that the Saudis’ interest in prolonging the world’s dependence on oil dates back at least a decade.
In conversations with colleagues and U.S. diplomats, Naimi responded to the American fixation on “security of supply” with the Saudi need for
“security of demand,” according to a 2006 embassy dispatch. “Saudi officials are very concerned that a climate change treaty would significantly
reduce their income,” James Smith, the U.S. ambassador to Riyadh, wrote in a 2010 memo to U.S. Energy Secretary Steven Chu. “Effectively, peak oil
arguments have been replaced by peak demand.” |
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