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Analysis 

75GW of renewable energy projects are in the pipeline in the GCC countries. Photo: Mike Flippo/Shutterstock)

opportunity cost. The estimated opportunity cost of low fuel prices (at US$73bn in 2015) is vastly higher than the budget cost (see Table 3). In terms of GDP the largest costs are estimated for Saudi Arabia and Kuwait, at 7.4 and 7.2 per cent, respectively, and the lowest for UAE (1.1 per cent in 2015). A large difference in ranking is attributed to differences in the energy consumption mix and local prices. Despite recent adjustments, Gulf energy prices are still cheap compared with developed and emerging regions. Looking ahead, further steps are needed to raise fuel prices in order to reduce overconsumption (hence waste) and costly subsidies that are necessary in the current low oil price environment, whilst improving energy efficiency. Saudi Arabia, Qatar and the UAE have recently created independent bodies to oversee energy efficiency awareness programmes for users, and have established stricter building codes and appliances standards. The International Energy Agency (IEA) stated, “Energy efficient buildings often yield greater year-round comfort levels, which in turn can be a low-cost means to provide health benefits for its occupants. Reducing energy demand will lower pollution levels by cutting unnecessary power generation and reduce urban heat island effects. Public buildings should be energy efficient and use renewable energy where possible, and local authorities should include the purchase of energy efficient products and services in their procurement rules.”

Striving for greater efficiency The GCC countries (led by the UAE) have also started investing in renewable sources of energy, principally solar photovoltaic (PV). The GCC bloc is expected to invest more than US$300bn into some 20 energy projects by 2020, which will generate eight gigawatts (GW) of additional power, according to Doha-based Gulf Organisation for Industrial Consulting (GOIC). Thus far, 75GW of renewable energy projects worth US$200bn are already in the

Table 3: GCC: Opportunity cost from energy products* Priced below US benchmark** 2013

2014

2015

US$bn Bahrain

2.1

2.5

1.6

Kuwait

12.0

12.7

9.3

Oman

5.2

5.8

2.8

Qatar

8.7

10.6

7.7

Saudi Arabia

66.0

69.9

47.3

UAE

8.3

9.6

3.8

GCC Total

102.4

111.1

72.5

* Energy products include gasoline, diesel, electricity and natural gas **US pre-tax prices Sources: IMF, IEA, US EIA and GCC countries' agencies

Issue 7 2016

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Profile for Alain Charles Publishing

Oil Review Middle East 7 2016  

Oil Review Middle East 7 2016