The geopolitics of energy has been for decades revolved around fossil fuels, namely coal, oil and gas. The concentration of fossil fuels in only a handful of countries has enabled some nations to control access to energy, put influence over others, create bilateral and multilateral alliances, and global interdependencies between states. In particular, the countries of Arabian Peninsula – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE – have been for decades the most advantaged by the geopolitics of fossil fuels as they host nearly a third of proven world crude oil and around a fifth of global natural gas reserves. Importantly, two of its members, Saudi Arabia and Kuwait, were the founding members of the Organization of the Petroleum Exporting Countries (OPEC) which was created at the Baghdad Conference on September 10–14, 1960, along with Iran, Iraq, and Venezuela, still play a prominent role in coordinating global oil policies. Also, today’s largest volumes of global seaborne crude oil – around 30% – along with a significant volume of LNG, passes through its Straits of Hormuz, making it the most important maritime oil chokepoint which connects the Gulf states with key global markets in the East and the West.
The acceleration of low-carbon economic transitions and the pace of innovations in clean energy technologies, however, can jeopardize the strategic importance of the Gulf Arab states over the next decades. While renewable energy does not dominate today’s total final energy consumption (TFEC), accounted for 18.2% of TFEC in 2018, the growth in global electricity generation is already dominated by clean energy. The transformation of global energy systems will be further accelerated as 195 nations have reached a landmark agreement, Paris Climate Accord, at the 21st Conference of the Parties to the UNFCCC in December 2015, which aims to “holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels.” To meet the goals of the Paris Climate Agreement, the world must reach net-zero emissions soon after 2050. What does that mean for fossil fuels? The International Energy Agency (IEA) sees that the world can reach net-zero emissions by 2060, wherein 75% of reduction comes from energy efficiency and renewable energy, with another 14% from carbon capture and storage, 6% from nuclear and 5% from fuel switching. In this context, the fossil fuels’ share of the global energy mix falls from 82% in 2014 to 35% in 2060 under the 2°C scenario, or to 26% in the below 2°C scenario.
In fact, the fossil fuel era has already seen shifts in powers and changes in interdependencies between states because of changes in the dynamics of energy supply and prices. For instance, the Arab oil embargo of 1973, which halted all oil exports to Canada, Japan, the Netherlands, the UK and the US, as well as the 1979 oil crisis which brought about an oil price spike towards $120 per barrel, triggered concerns over future security of supply and led to drastically new energy policies, which formed the basis for today’s clean energy such as enhancing energy efficiency programs or increasing funding for clean energy innovations. Due to increasing measures of energy efficiency and increasing adoption of renewables, oil demand has already peaked between 2003 and 2005, including in the US, Japan and the EU. In the course of the 1990s and 2000s, concerns about the health impacts of fossil fuel emissions and their association with climate change have made the transformation of global energy systems even more important.
The post-Paris Climate Agreement is thus expected to bring about new dynamics to energy geopolitics. Renewable energy technologies, in particular, can play a significant role in transforming the geopolitics of energy and changing the landscape of interdependency between states because of the geographical distribution of minerals used to build renewable energy technologies, technical availability of renewable energy resources such as solar, wind and hydro, and nations’ leadership in technological innovation. Renewable technologies and batteries require certain minerals for their production, such as cobalt, lithium, nickel and rare earth elements. Despite the fact that renewable endowments for wind, solar, geothermal and biomass are scattered geographically, controlling the production of these new commodities will have major geopolitical consequences as they are based only in a selected number of countries such as Chile, Bolivia, Mongolia, and the Democratic Republic of Congo (DRC). Another important component which would transform the relations between states is the leadership in technological innovation. Leaders in technological innovation are positioned to gain the most from the global energy transformation. At present, China dominates the world’s investment and innovation in renewable energy technologies.
Within this new context of geographical distribution of energy, the importance of the Gulf Arab states will be eroded not only because of the decline in global demand for oil but also because Gulf countries are not rich in the minerals required to build renewable energy technologies, and are highly dependent on technology imports rather than in-house technology innovation and research and development. The IEA’s Sustainable Development Scenario suggests that all hydrocarbon producer economies will see a fall in total rent of about 40% by 2040 compared with the ‘golden years’ of 2010-14 due to rigorous policies on fuel switching and efficiency to reach net-zero emissions in the second half of this century. At the same time, the ‘golden years’ of high income from oil and gas exports have not strengthened the importance of the Gulf states in terms of technological innovation. In 2013, R&D investment in Gulf countries averaged 0.3% of the gross domestic product (GDP), compared with 2%–3% in industrialized countries. The 0.3% figure is far less than the minimum percentage (1%) needed for an effective science and technology base specified by UNESCO.
Nevertheless, in the new energy era, the Gulf Arab states are still advantaged by their geographical location. These countries are specially positioned for harnessing wind and solar energy. They can enhance their competitiveness in the new energy market by strengthening their clean energy market both at the domestic and international levels. Domestically, renewable energy still accounts for less than 1% of the total electricity supply in the Gulf Arab states in 2018. This is worrying because regional domestic energy demand is extraordinarily surging at 5% per annum, faster than anywhere else in the world. Yet, one can be optimistic to see a 355% increase in total renewable electricity installed capacity in only four years between 2014-2018 in the Gulf Arab states.
Today, all the Gulf Arab states have adopted renewable energy targets but the transformation of regional energy systems are not speedy enough especially that none of the Gulf Arab states present a clear strategy on how their targets can be achieved or ratcheted up. Gulf Arab states should strengthen their renewable energy targets by providing clear, holistic renewable energy strategies in order to enhance the attractiveness of renewable energy investments in the region. Hitting the world’s record low costs for utility solar projects of equal or under $0.03 per kWh, is another source of optimism as the costs of renewables have been for decades a major challenge for their adoption. Tapping on their high renewable energy potential, the Gulf states can also strengthen their position by enhancing their regional electricity market cooperation not to trade their renewables only regionally but also globally. Furthermore, while the Gulf Arab states under the OPEC have played a significant role in the fossil fuels era, they might be left behind if they do not re-thinking their future alliances in the context of new energy era. The 2015 Paris climate conference alone gave birth to the International Solar Alliance (ISA), the Global Geothermal Alliance, and Mission Innovation. “The ISA will play the role of OPEC in the future”, said India’s Prime Minister, Narendra Modi. In short, in order to eliminate the risks associated with clean energy transition, the hydrocarbon-rich states of the Arabian Peninsula need to fundamentally re-think both their domestic and foreign energy policies.
Image Credit: U.S. Navy photo by Photographer’s Mate 2nd Class Andrew M. Meyers. [Public domain], via Wikimedia Commons
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The author is a visiting researcher at Georgetown University. She previously served as a researcher at The Arab Gulf States Institute in Washington and The London School of Economics and Political Science’s Middle East Centre. Her research interests include energy policy, renewable energy, climate change policies and the political economy of the Arab Gulf states. She holds a PhD from Imperial College London.