By 2040, one of every two: International Energy Agency, World Energy Outlook 2016, 143.
America’s energy boom may allow: President Eisenhower initially played hardball with France, the U.K., and Israel, urging them to withdraw from the Suez before orchestrating the Oil Lift. See Daniel Yergin, The Prize: The Epic Quest for Oil, Money and Power (New York: Simon & Schuster, 2009), 466–77.
But, at least for the coming decade: See International Energy Agency, World Energy Outlook 2016, 128–38.
For instance, growing Iranian influence: As of 2016, together, Iran and Iraq have 18 percent of world oil reserves and 9 percent of global oil production. “International Energy Statistics,” U.S. Energy Information Administration, https://www.eia.gov/beta/international/data/browser/#/?pa=0000000000000000000008000000000000g&c=0000000000000000000003&ct=0&tl_id=5-A&vs=INTL.53-1-IRN-TBPD.A&cy=2016&vo=0&v=H&start=2010.
As Joe Nye of Harvard mused: “A Symposium of Views: The Geopolitics of U.S. Energy Independence,” 23.
Being responsive has required: The EIA defines spare capacity as “the volume of production that can be brought on within 30 days and sustained for at least 90 days.” “What Drives Crude Oil Prices: Supply OPEC,” U.S. Energy Information Administration, https://www.eia.gov/finance/markets/crudeoil/supply-opec.php.
If anything, we may see: In a 1986 press conference, with oil at $10 a barrel, Vice President Bush described what he intended to say in an upcoming trip to Riyadh, “My plea will be for stability in the marketplace. . . . [Prices cannot continue a] free fall like a parachutist jumping out without a parachute.” He explained to his Washington audience that low prices were harming U.S. interests; a former oilman, Bush considered the beating the U.S. oil industry was taking from low prices to be a threat to American national security. “A Plea for Stability, not Price-Setting, on the Oil Market,” New York Times, April 6, 1986, www.nytimes.com/1986/04/06/weekinreview/a-plea-for-stability-not-price-setting-on-the-oil-market.html. Vice President Bush found himself in the political spotlight after these comments, which appeared at odds with the views of President Reagan, who felt the market alone should determine the price of oil and believed low prices were an enormous boon to American consumers. See Gerald M. Boyd, “Bush Seeks to End Confusion Stirred by Oil Price Views,” New York Times, April 8, 1986, www.nytimes.com/1986/04/08/business/bush-seeks-to-end-confusion-stirred-by-oil-price-views.html.
As a result, there will be: Oil has long been a central point of diplomatic conversations. For multiple declassified transcripts and meeting notes of such encounters, see Foreign Relations of the United States, 1969–1976, ed. Steven G. Galpern and Edward C. Keefer, vol. 37, Energy Crisis, 1974–1980 (Washington, DC: U.S. Government Printing Office, 2012), https://history.state.gov/historicaldocuments/frus1969-76v37.
He said “Leadership is needed.”: Senior Turkish diplomat, in-person conversation with author, Ankara, Turkey, August 26, 2016.
It provided billions of dollars: See Mariam Fam and Nadeem Hamid, “Saudi King Calls for Egypt Aid Drive After El-Sisi Win,” Bloomberg, June 4, 2014, www.bloomberg.com/news/articles/2014-06-03/saudi-king-seeks-aid-drive-for-egypt-after-el-sisi-win.
And it finalized deals to buy: Gopal Ratnam, “U.S. Seeks $10.8 Billion Weapons Sale to U.A.E., Saudis,” Bloomberg, October 15, 2013, www.bloomberg.com/news/articles/2013-10-15/u-s-seeks-10-8-billion-weapons-sale-to-u-a-e-saudis. See also “China, Saudi Arabia Vow to Strengthen Military Ties,” China Military Online, November 18, 2014, http://english.chinamil.com.cn/news-channels/china-military-news/2014-11/18/content_6229730.htm.
It will take time for these efforts: For now, Europe has little economic heft and few security assets to undergird a more robust political engagement. China, while gradually appreciating the need to engage more broadly in the Middle East, is definitively a reluctant player, having few if any of the capabilities needed to play a meaningful role alongside the United States, despite its deep energy interests there. See Chapter Ten.
According to Ottaway, Prince Bandar: Ottaway, The King’s Messenger: Prince Bandar bin Sultan and America’s Tangled Relationship with Saudi Arabia, 1.
Certainly, neither Saudi Arabia: As noted earlier in the chapter, given the fluidity of the global oil market, merely stopping exports to one destination would not have a huge impact in any case; truly destabilizing markets require taking production off the market.
The IEA created a “Low Oil Price Scenario”: See the Low Oil Price Scenario in International Energy Agency, World Energy Outlook 2015 (Paris: OECD Publishing, 2015), 154. The U.S. EIA also has a low-price scenario, where the Brent price of crude oil is only $38 in 2020 and $43 in 2025. See “Annual Energy Outlook 2016,” U.S. Energy Information Administration, www.eia.gov/forecasts/aeo/data/browser/#/?id=19-AEO2016.
In this scenario, low-cost producers: International Energy Agency, World Energy Outlook 2015, 164–66.
According to the IEA, by 2040: International Energy Agency, World Energy Outlook 2015, 188, http://www.worldenergyoutlook.org/weo2015/.
Asia in particular becomes more vulnerable: Ibid., 178. It is important to distinguish between this number—which is indicative of Asia’s increasing reliance on Middle Eastern oil for supply—with the 90 percent number cited earlier in the book, which indicates growing Middle East dependency on Asia for demand.
Later dubbing his theory: Thomas L. Friedman, “The First Law of Petropolitics,” Foreign Policy, October 16, 2009, http://foreignpolicy.com/2009/10/16/the-first-law-of-petropolitics/.
Pointing out that Bahrain: “Friedman on Petropolitics and Global Corruption,” NPR, March 4, 2006, www.npr.org/templates/story/story.php?storyId=5383613.
Friedman came under a barrage: See, for example, Romain Wacziarg, “The First Law of Petropolitics,” Economica 79, no. 316 (October 2012): doi:10.1111/j.1468-0335.2011.00902.x.
countries whose economies are heavily reliant: For more on the resource curse, see Andrew Bauer and Juan Carlos Quiroz, “Resource Governance,” The Handbook of Global Energy Policy, ed. Andreas Goldthau (Malden, MA: John Wiley & Sons, 2013), 244–64; Shah M. Tarzi and Nathan Schackow, “Oil And Political Freedom In Third World Petro States: Do Oil Prices and Dependence On Petroleum Exports Foster Authoritarianism?,” Journal of Third World Studies 29, no. 2 (Fall 2012): 231–50.
Even though it was the thirteenth largest: “Production of Crude Oil, NGPL, and Other Liquids 2012,” U.S. Energy Information Administration: Beta, https://www.eia.gov/beta/international/rankings/#?cy=2012&pid=55&tl_id=5-A; “Nigerians Living in Poverty Rise to Nearly 61%,” BBC News, February 13, 2012, www.bbc.com/news/world-africa-17015873.
In response, the Saudi government increased: See “World Report 2012: Saudi Arabia, Events of 2011,” Human Rights Watch, https://www.hrw.org/world-report/2012/country-chapters/saudi-arabia.
the total price of these perks: Neil MacFarquhar, “In Saudi Arabia, Royal Funds Buy Peace for Now,” New York Times, June 8, 2011, http://www.nytimes.com/2011/06/09/world/middleeast/09saudi.html.
Shortly after acceding to the throne: Ben Hubbard, “Saudi King Unleashes a Torrent of Money as Bonuses Flow to the Masses,” New York Times, February 19, 2015, www.nytimes.com/2015/02/20/world/middleeast/saudi-king-unleashes-a-torrent-as-bonuses-flow-to-the-masses.html?action=click&contentCollection=MiddleEast®ion=Footer&module=MoreInSection&pgtype=article; “Budget: Research for the People,” National Institutes of Health, https://www.nih.gov/about-nih/what-we-do/budget.
Appreciative Saudis created a new: Hubbard, “Saudi King Unleashes a Torrent of Money.”
The yawning gap between: This fiscal breakeven price almost always exceeds a different threshold price—the actual cost of producing a single barrel of oil. On average, the cost of finding and lifting a barrel of crude oil or natural gas equivalent in the Middle East is less than $17, compared with $45 in Africa and $34 for conventional resources in the United States (in 2009 dollars). “How much does it cost to produce crude oil and natural gas?,” U.S. Energy Information Adm
inistration, January 15, 2014, http://web.archive.org/web/20150211220237/www.eia.gov/tools/faqs/faq.cfm?id=367&t=6.
In Saudi Arabia, the breakeven price: According to the IMF, Saudi Arabia’s fiscal breakeven price in 2008 was $38. Six years later, in 2014, it was $106. “Breakeven Fiscal Oil Price, US Dollars Per Barrel: Saudi Arabia, Dataset: MCD Regional Economic Outlook October 2016,” International Monetary Fund, http://data.imf.org/?sk=388DFA60-1D26-4ADE-B505-A05A558D9A42&ss=1479331931186.
At the end of 2014, soon after: “Breakeven fiscal oil price, US dollars per barrel, Dataset: MCD Regional Economic Outlook October 2016,” International Monetary Fund, http://data.imf.org/?sk=388DFA60-1D26-4ADE-B505-A05A558D9A42&sId=1479331931186.
Saudi Arabia, Bahrain, and Oman: Ibid.
In late 2014, only Kuwait: Kuwait’s breakeven price in 2014 was $56 and UAE’s was $79. Ibid.
In 2014, Saudi Arabia, for example: The United Nations Economic and Social Commission for Western Asia estimated this figure for reconstruction in September 2014. “UN: Rebuilding Syria, Iraq and Gaza Will Cost $750bn,” Middle East Monitor, September 16, 2014, www.middleeastmonitor.com/news/americas/14162-un-rebuilding-syria-iraq-and-gaza-will-cost-750bn; “Total reserves (includes gold, current US$),” The World Bank, data.worldbank.org/indicator/FI.RES.TOTL.CD?end=2015&locations=SA&start=2011; “GDP (current US$),” The World Bank, data.worldbank.org/indicator/NY.GDP.MKTP.CD?end=2015&locations=SA&start=2011.
The reserves of the emirates: “Investment Corporation of Dubai,” Sovereign Wealth Fund Institute, http://www.swfinstitute.org/swfs/investment-corporation-of-dubai/; “Abu Dhabi Investment Authority,” Sovereign Wealth Fund Institute, www.swfinstitute.org/swfs/abu-dhabi-investment-authority/; “How Much is a Trillion dollars? What a Trillion Can Buy,” Fox Business, April 30, 2015, www.foxbusiness.com/features/2015/04/30/how-much-is-trillion-dollars-what-trillion-can-buy.html.
or roughly twice the annual: Kevin McCormally, “14 Ways to Spend $1 Trillion,” Kiplinger.com, January 28, 2011, www.kiplinger.com/article/business/T043-C000-S001-14-ways-to-spend-1-trillion.html.
For a small country with more expatriates: AFP, “Kuwait Fiscal Reserves Hit Record $592 bn: Report,” Yahoo News, July 9, 2015, https://www.yahoo.com/news/kuwait-fiscal-reserves-hit-record-592-bn-report-092133093.html.
Even the few nations that did: As of November 24, 2014, Bahrain was expected to have a deficit of $2.2 billion in 2015, while its reserves were estimated at just $6.4 billion. As of January 15, 2015, Oman expected a deficit of $2.7 billion for 2015, with 2014 reserves of $19.6 billion. Toby Illes, ed., Country Report: Bahrain, Economist Intelligence Unit, November 24, 2014, 10; Robert Powell, ed., Country Report: Oman, Economist Intelligence Unit, January 15, 2015, 9.
In the three months between October 2014: “Breakeven fiscal oil price, US dollars per barrel,” International Monetary Fund.
Bahrain, Kuwait, Oman: International Monetary Fund, “Statistical Appendix,” Regional Economic Outlook Update: Middle East and Central Asia: Learning to Live with Cheaper Oil Amid Weaker Demand, Washington, D.C., January 21, 2015. In some cases, canceled projects go beyond the borders of a country, such as the decision by Kuwait Petroleum International to terminate its investment in a refinery in the Netherlands. “UPDATE 1—Kuwait’s KPI Cancels Refinery Investment, Considers Sale,” Reuters, October 6, 2014, http://uk.reuters.com/article/2014/10/06/kpi-refinery-europoort-idUKL6N0S11P020141006.
Of all the Gulf monarchies: In contrast to Saudi Arabia, which relies on oil to provide between 80 and 90 percent of fiscal earnings, oil revenues comprise 4 percent of the UAE’s federal revenue. Kuwait relies on oil for a similarly high percentage of its budget to Saudi Arabia, but its financial reserves per capita dwarf those of Saudi Arabia. Robert Powell, ed., Country Report: Saudi Arabia, Economist Intelligence Unit, December 18, 2014, 5; Frank Kane, “Budget Shows Oil Is Not the Lifeblood of Dubai’s Growth,” The National, January 6, 2015, www.thenational.ae/business/economy/budget-shows-oil-is-not-the-lifeblood-of-dubais-growth; “Kuwait Launches Another Development Plan,” Economist Intelligence Unit, n.d.
From 2014 to the end of 2016: “Saudi Arabia: Annual Data and Forecast,” Economist Intelligence Unit, April 3, 2017, http://country.eiu.com.ezp-prod1.hul.harvard.edu/article.aspx?articleid=235353607&Country=Saudi%20Arabia&topic=Economy&subtopic=Charts+and+tables&subsubtopic=Annual+data+and+forecast&aid=1&oid=235353607.
At more than thirty million people: Approximately two-thirds of this thirty million are Saudi citizens, whereas one-third are expatriates living in the kingdom. “Trends in International Migrant Stock,” The United Nations Population Division, 2015, www.un.org/en/development/desa/population/migration/data/estimates2/data/UN_MigrantStockTotal_2015.xlsx.
Birth rates in the kingdom: Department of Economic and Social Affairs, Population Division, World Population Prospects: The 2017 Revision, DVD Edition (New York: The United Nations, 2017), https://esa.un.org/unpd/wpp/DVD/Files/1_Indicators%20(Standard)/EXCEL_FILES/1_Population/WPP2017_POP_F01_1_TOTAL_POPULATION_BOTH_SEXES.xlsx.
But in Saudi Arabia: Ben Hubbard, “Young Saudis See Cushy Jobs Vanish Along With Nation’s Oil Wealth,” New York Times, February 16, 2016, https://www.nytimes.com/2016/02/17/world/middleeast/young-saudis-see-cushy-jobs-vanish-along-with-nations-oil-wealth.html.
More than a quarter of a million: General Authority for Statistics, Kingdom of Saudi Arabia, https://stats.gov.sa/en/node.
In 2012, a report by Alkhabeer Capital: “Analysis of Saudi Unemployment,” Alkhabeer Capital, March 10, 2014, http://jef.org.sa/files/analysis-of-saudi-unemployment.pdf.
Providing health care and education: Fahad M. Alturki, Asad Khan, and Rakan Alsheikh, “Saudi Arabia’s 2015 Fiscal Budget” (Riyadh: Jadwa Investment, December 28, 2014), www.jadwa.com/en/download/2015-budget/2015-saudi-budget.
In 2015, gasoline was just 45: Kevin Sullivan, “If You Think Gas Is Cheap These Days, Look What It Costs in Saudi Arabia,” Washington Post, February 8, 2015, www.washingtonpost.com/world/middle_east/if-you-think-gas-is-cheap-these-days-look-what-it-costs-in-saudi-arabia/2015/02/07/889536ef-fb15-4453-b99b-eb99622dcf4e_story.html.
In 2013, electricity prices: Christopher Segar, “Saudi Energy Mix: Renewables Augment Gas,” International Energy Agency, November 3, 2014, web.archive.org/web/20141128053419/www.iea.org/ieaenergy/issue7/saudi-energy-mix-renewables-augment-gas.html.
As a result, domestic demand: As of 2014, natural gas fuels 43 percent of Saudi electricity, with fuel oil and diesel providing the balance. Ibid.
In 2009, overall Saudi energy demand: Khalid A. Al-Falih, “Saudi Aramco and Its Role in Saudi Arabia’s Present and Future,” Saudi Arabia Oil & Gas speech, MIT Club of Saudi Arabia, Riyadh, Saudi Arabia, April 19, 2010, http://saudiarabiaoilandgas.com/index.php?option=com_content&view=article&id=61:saudi-aramco-and-its-role-in-saudi-arabias-present-and-future-issue14&catid=43:current-issue&Itemid=55.
Extrapolating that year’s demand: Ibid.
Aid to Bahrain, Egypt, Jordan: “KSA [Kingdom of Saudi Arabia] Has Allocated SR252bn in Foreign Aid Since 1990,” Arab News, September 29, 2014, www.arabnews.com/economy/news/637176.
Moreover, during a visit of Saudi: “Egypt Will Receive Oil Shipments from KSA Late March: El Molla,” Daily News Egypt, March 17, 2017, http://www.dailynewsegypt.com/2017/03/16/egypt-will-receive-oil-shipments-ksa-late-march-el-molla/.
Rather than simply hoping for a revival: For more on energy reforms in the Gulf, see Bassam Fattouh, Anupama Sen, and Tom Moerenhout, “Striking the Right Balance? GCC Energy Reforms in a Low Price Environment” (Oxford Energy Comment, The Oxford Institute for Energy Studies, University of Oxford, Oxford, U.K., May 2016), https://www.oxfordenergy.org/publications/striking-right-balance-gcc-energy-reforms-low-price-environment/.
The countries of the Gulf Cooperation Council: “Oil Exporters Respond to Price Slump,” Economist Intelligence Unit, January 1, 2016.
The favorite son of the elderly: Karen Elliott House, “Uneasy Lies the Head That Wears a C
rown: The House of Saud Confronts Its Challenges,” Senior Fellow paper, Belfer Center for Science and International Affairs, Kennedy School of Government, Harvard University, Cambridge, MA, March 2016, 3, http://belfercenter.ksg.harvard.edu/files/Saudi%20Paper%20web.pdf.
MbS has anchored his own personal ambitions: See Kingdom of Saudi Arabia, Saudi Vision 2030, April 25, 2016, http://vision2030.gov.sa/en.
The proceeds will provide added capital: See Ibid.; Stefania Bianchi, “The Key Questions Asked About Saudi Arabia’s $2 Trillion Fund,” Bloomberg, May 25, 2016, https://www.bloomberg.com/news/articles/2016-05-25/key-questions-raised-by-the-2-trillion-saudi-wealth-fund-plan.
The young prince declared: See Adam Taylor, “Saudi Arabia Announces Plan to End Its ‘Addiction’ to Oil,” Washington Post, April 25, 2016, www.washingtonpost.com/news/worldviews/wp/2016/04/25/saudi-arabia-announces-plan-to-end-its-addiction-to-oil/.
An even greater obstacle: See Laura El-Katiri, “Saudi Arabia’s Labor Market Challenge,” Harvard Business Review, July 6, 2016, https://hbr.org/2016/07/saudi-arabias-labor-market-challenge.
The energy boom in the United States: The unconventional boom could frustrate the progress that Saudi Arabia has made in building an extensive petrochemical sector by opening up the possibility of either more chemical plants in the United States or the export of significant amounts of U.S. ethane. Either outcome would constitute a disruption to Saudi Arabia and could challenge its markets in Asia, Europe, and Latin America. See Figure 2, “Shale Gas: Reshaping the US Chemicals Industry,” PricewaterhouseCoopers, October 2012, 5, https://web.archive.org/web/20160302155537/http://www.pwc.com/us/en/industrial-products/publications/assets/pwc-shale-gas-chemicals-industry-potential.pdf. Nick Butler, “Ethane—the Next Challenge for the Energy Market,” Financial Times, January 18, 2015, http://blogs.ft.com/nick-butler/2015/01/18/ethane-the-next-challenge-for-the-energy-market/; Alex Chamberlin, “Ethane Production: The Prospects and Possibilities in the Market,” Market Realist, April 14, 2014, http://marketrealist.com/2014/04/ethane-production-prospects-possibilities-market/.
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