The fossil fuel crisis intensified during the recent COP-28 climate conference in Dubai, UAE, last November, as tensions rose between OPEC member states, led by Saudi Arabia and Kuwait, on one side, and a coalition of 100 nations, spearheaded by the United States and the European Union, advocating for a gradual reduction in fossil fuel use. OPEC blocked negotiations to establish an international agreement with a clear plan to phase out fossil fuels. Additionally, the OPEC Secretary-General urged member states to reject any agreement that could undermine oil and gas production.
While the UAE yielded to some pressure and distanced itself from discussions within the Arab bloc in OPEC, aiming to avoid an awkward position as the host country and to enhance its influence through the conference’s success, other Gulf Cooperation Council (GCC) member states resisted the pressure from the G100 group. Saudi Arabia expressed its dissatisfaction with the wording of the conference’s final draft. Notably, Saudi Energy Minister Abdulaziz bin Salman, half-brother of Crown Prince Mohammed bin Salman, was absent from the UN general session. Meanwhile, Dr. Yahya Naji Al-Hadban, a member of the Kuwaiti delegation, remarked that “the term ‘gradual cancellation’ is like a death sentence.”
In the face of opposition from OPEC countries, led by Saudi Arabia, the final outcomes of the summit did not include an executive plan to gradually reduce the use of fossil fuels, opting instead for a general call to “transition away” from fossil fuels. Commenting on the final document, UN Secretary-General Antonio Guterres stated, “To those who opposed the clear reference to phasing out fossil fuels in the conference draft, I want to say that phasing them out is inevitable, whether they like it or not.”
Saudi Arabia, as the world’s largest oil exporter and the most influential member of OPEC, holds significant sway within the organization, which collectively controls nearly 80% of the world’s proven oil reserves, with 67% of those reserves located in the Middle East. OPEC, along with its allied group OPEC Plus—which includes ten additional countries such as Russia and Mexico—contributes nearly 60% of the world’s oil supply.
Although it marked the first time that fossil fuels were explicitly recognized as a major contributor to climate change after years of avoiding the topic, the final agreement fell short of offering strong guarantees and was riddled with loopholes that could allow fossil fuel producers to evade meaningful action.
This crisis highlighted the improbability of taking significant steps toward “phasing down the use of fossil fuels” or seriously discussing a “green transformation” without first reaching an understanding with the Gulf states and, by extension, the member states of OPEC and OPEC Plus. It also underscores the importance of analyzing these countries’ movements, policies, and actions to comprehend their motivations for fiercely defending oil and gas production. Additionally, it raises critical questions: Are the economies of these nations truly capable of moving away from their dependence on fossil fuel revenues and making a rapid transition to renewable energy?
Continuing... until the Last Molecule of Carbon
The Gulf countries are determined not to bear the blame for climate change alone by being forced to abandon fossil fuel production prematurely. They anticipate a 15% increase in oil demand by 2030, driven by population growth and economic expansion. In response, these countries are seeking to boost fossil fuel production. This sentiment was expressed by Saudi Arabia’s Energy Minister, who pledged that the last barrel of oil on Earth would come from a Saudi well. In an interview with Bloomberg, he stated, “We will continue to extract oil until the last molecule of carbon,” and highlighted the Kingdom’s plans to increase its oil production capacity by more than 8% by 2027, aiming to reach 13 million barrels per day. Similarly, Mariam Al Muhairi, the UAE’s Minister of Climate Change and Environment, affirmed her country’s intention to continue producing and selling oil. In an interview with CNBC, she said, “As long as the world needs oil and gas, we will provide it.”
The Western countries that are demanding the Gulf states to phase out oil are the same ones currently pressuring OPEC to increase production. They cannot endure the high energy prices, especially in the context of the Russian-Ukrainian war and the energy crisis Europe is currently facing.
However, the estimates of the International Energy Agency (IEA)—representing the interests of Western countries that consume fossil fuels—differ significantly from those of the Gulf oil-producing nations. The IEA predicts that the demand for oil, gas, and coal is on a downward trajectory, expected to peak before the end of this decade and decline as climate change measures intensify.
Forecasting future trends in population change and economic growth is becoming increasingly difficult amid current global geopolitical shifts. Additionally, the pace of technological advancements in renewable energy, which could replace fossil fuel-generated power, remains uncertain. There is also a question of how committed rapidly growing nations like China and India will be to the green transformation. China, the second-largest oil consumer after the United States, uses around 15 million barrels daily, while India, the third-largest consumer, uses nearly 5 million barrels daily.
Addressing the conflict in future estimates between producers and consumers, Omani researcher in political science and international relations, Alawi Al-Mashour, told Muwatin: “The Western countries that are demanding the Gulf states to phase out oil are the same ones currently pressuring OPEC to increase production. They cannot endure the high energy prices, especially in the context of the Russian-Ukrainian war and the energy crisis Europe is currently facing.”
In his book The Political Economy of Oil in the Middle East, Professor of Petroleum Sciences and Political Economy Munther Makhous highlights that the Gulf countries’ share of global oil production is relatively small compared to their vast oil resources, which are estimated to constitute at least half of the world’s crude oil reserves. Makhous anticipates that these countries will strive to close this gap by expanding their production in the future, leveraging the region’s notably low production costs, which are the lowest in the world.
Rajat Kapoor, Director of Oil and Gas Affairs at Synergy Consulting, also foresees continued growth in the demand for fossil fuels in the coming years, with Gulf countries poised to increase their production share. Kapoor told Muwatin: “As we transition to cleaner alternatives, it is crucial to ensure stable energy supplies in the interim and to recognize that the shift to renewable energy will take time and necessitate an increase in energy sources.”
Carbon Bombs and the Challenge of Green Transformation
The Gulf countries’ push to expand fossil fuel projects comes at a time when they are home to 60 out of the world’s 195 carbon bombs, with total emissions estimated at 220 billion tons of carbon dioxide. Saudi Arabia ranks second globally in the number of carbon bombs within its territory, with 24 such projects. The term “carbon bomb” has gained prominence in climate discussions in recent years, referring to large fossil fuel developments projected to emit at least one billion tons of carbon dioxide over their lifetimes.
Despite the significant environmental impact of these carbon bombs, the Gulf countries have not yet presented a concrete strategy to address them. Their current approach largely revolves around discussing emerging technologies designed to capture and sequester carbon. However, these technologies remain in the developmental stage and are not yet ready to be deployed on a large scale.
In his book, The Challenge of Green Capitalism, political economy professor Adham Hanieh highlights the emergence of the “East-East axis” in the early 2000s, which includes the Gulf states on one side and China and Asia on the other. This axis has solidified the Gulf’s position at the core of contemporary “fossil fuel capitalism.” The activities of this axis extend beyond merely exporting crude oil; they encompass vast industrial sectors involved in petroleum refining and petrochemicals. Hanieh argues that any successful “green transition” in the Middle East or globally is impossible without developing effective strategies to address the structure of the fossil fuel industry, which intricately connects oil fields, refineries, and factories across the Middle East and Asia. Stopping climate deterioration is also closely tied to exerting sufficient control over this axis.
Hamza Hamoushan, a researcher, environmental activist, and editor of The Challenge of Green Capitalism, echoed this sentiment in an interview with Muwatin. He pointed out that the ruling elites in the Gulf states are well aware of their countries’ central role in the global fossil fuel and energy system. They believe it will be difficult to shift away from this reliance for several decades, and they are likely to continue reaping substantial profits and accumulating capital, regardless of the environmental consequences, to secure a significant share of financial surpluses on both regional and global levels.
Internal Obstacles to Green Transformation
The economies of the Gulf countries, along with the needs of their citizens, are deeply intertwined with oil. The general budgets of these countries remain heavily dependent on fossil fuel sales, with every fluctuation in oil and gas prices—whether a dollar increase or decrease—significantly impacting their financial stability, often translating into billions of dollars. For instance, Saudi Arabia requires the price of oil to hover around $80 per barrel to avoid a deficit in its general budget this year. The Saudi Ministry of Finance reported a budget deficit of $82 billion last year, largely due to the ongoing economic slowdown and a decline in oil-related activities. This was particularly evident following the voluntary reduction in oil production that the Kingdom implemented last May when global oil markets experienced relatively weak prices.
The GCC countries are working on establishing major projects aimed at diversifying their economies away from oil resources, ensuring a continued flow of financial wealth. The ruling regimes in the Gulf are aware that their stability and the stability of internal affairs depend on maintaining economic prosperity for their populations. Saudi Arabia leads these countries with ambitious projects as part of its strategic plan known as “Vision 2030,” which includes the creation of large-scale manufacturing and production sectors, as well as the construction of cities and infrastructure, including green projects like the development of the new city “NEOM,” which is expected to cost $500 billion and is intended to be carbon-neutral, fully powered by renewable energy. Additionally, a project to green Riyadh includes planting one tree for every resident in the city. Naturally, all of this cannot be achieved without oil revenues.
The Gulf countries possess the world’s smallest share of agricultural land, with only 1% of their total land. Additionally, the region experiences low and irregular rainfall due to climate change, making it heavily reliant on food imports for its food security. Countries like Qatar, Bahrain, and the UAE import 80-90% of their food needs. Without current oil revenues, these countries could not afford the food bill, estimated at $53 billion for the six GCC countries in 2020 and expected to rise to $70 billion by 2030 due to population growth and increasing food prices.
Gulf countries' share of global oil production is relatively small compared to their vast oil resources, which are estimated to constitute at least half of the world's crude oil reserves.
Beyond the financial revenues generated from fossil fuel exports, oil and gas consumption in the Gulf countries continues to rise. Saudi Arabia is the largest energy consumer in the region and the fifth-largest oil consumer globally, with approximately 3.717 million barrels per day consumed as of 2022. This means that 35% of its oil production is used domestically. In addition, Saudi Arabia consumed around 120 billion cubic meters of natural gas in the same year.
The Gulf countries also have some of the world’s highest per capita energy consumption rates. Several factors contribute to this, including the high energy consumption of the transportation sector due to the large number of private cars, the lack of public transportation networks that would facilitate travel without the need for a private vehicle, and the fuel consumption required for electricity generation, which is essential in the hot Gulf cities with their long summers.
The process of water desalination requires large amounts of oil to generate electricity and operate the plants. According to the Saudi Ministry of Environment, Water, and Agriculture, a quarter of Saudi Arabia’s oil production is consumed in desalinating water. The Gulf countries carry out over half of the world’s water desalination operations. In one of the driest regions globally, where more than 90% of drinking water consumption relies on desalinated water, the local energy demand, heavily dependent on fossil fuels, will continue to rise to meet the electricity needs of desalination plants. This will sustain the threat of carbon bombs and exacerbate global warming alongside another environmental issue: increasing salinity levels in the Arabian Gulf and the Red Sea.
Environmental researcher and activist Hamza Hamoushan commented on the argument presented by Gulf countries, which is their need for oil resources to diversify their economies, saying, “For many years, we have heard about planning for the post-oil era and economic diversification, but in reality, there is no clear strategy. Often, this legitimate goal is used as a justification for continuing oil production.” Hamoushan added, “Unlike many other countries, the GCC states are in a better position to achieve a transition to clean energy and keep fossil fuels underground due to their small populations, but this won’t happen because the ruling families do not want it.”
The economies of the Gulf countries are almost entirely dependent on oil resources, placing them in a difficult position between the challenges of climate change—which poses catastrophic risks to their nations and populations
On the other hand, Omani researcher Alawi Al-Mashour disagrees, arguing that it is impossible for Gulf countries to transition to green energy and reduce carbon emissions without relying on oil resources. He says, “Some countries have advanced and diversified economies, vibrant industrial sectors, abundant agricultural wealth, and vast water resources, which might allow them to do so. But for countries living in harsh environments with difficult climates, unsuitable terrain for agriculture, and lacking advanced industrial or service sectors, moving towards clean energy without maintaining or increasing their oil exports will lead to failure, as they won’t have the financial resources to fund the necessary projects.”
To Go Green, We Release More Carbon Emissions
Amid the global race to produce green hydrogen—a resource expected to become the fuel of the future and replace fossil fuels—many countries in the region have announced their national hydrogen strategies. Among these, Oman, the UAE, and Saudi Arabia have made notable commitments. Saudi Arabia has declared its ambition to become the world’s leading exporter of green hydrogen by 2030, just as it is currently the leading oil exporter. The Kingdom also aims to produce 2.9 million tons of green and blue hydrogen by the same year.
The UAE has also been at the forefront of the move towards green hydrogen, aiming to establish a strong presence in a market attracting growing global interest. The UAE announced its ambitious plan to capture a quarter of the global hydrogen market by 2030 and to produce 15 million tons of hydrogen by 2050. Meanwhile, Oman is targeting the production of around one million tons of hydrogen by 2030.
The Gulf countries’ hydrogen production projects are not limited to their own territories; they are also forging agreements and understandings to establish projects across the Middle East and North Africa for export purposes. For example, the UAE’s Masdar company has implemented one of the largest green hydrogen projects in Egypt, while Saudi Arabia’s ACWA Power has launched a $4 billion hydrogen project and is constructing the largest wind farm in the Middle East, valued at $1.5 billion with a capacity of 1.1 gigawatts, also in the Gulf of Suez, Egypt.
Through these domestic and international projects, the Gulf states are working to ensure their continued strategic role by maintaining control over the global energy market—whether it involves environmentally harmful energy sources like oil or cleaner options like green hydrogen, wind, and solar power. Christian Henderson, a researcher in the political economy of the Middle East at Leiden University in the Netherlands, argues that the expansion of renewable energy production in the Gulf is motivated by the need to conserve oil for export. In other words, the primary driver is financial sustainability, not environmental concerns. Additionally, the Gulf Cooperation Council (GCC) countries see this as an opportunity to tap into a new market.
The Gulf fears that agreeing to cut fossil fuel production would lead to a loss of their strategic importance on the global stage, derived from their central role in energy production.
Environmental researcher and activist Hamza Hamoushan emphasizes that “the transition to green energy should aim for a just transition, focused on reducing emissions and protecting the environment to ensure it remains livable, rather than merely treating renewable energy as another revenue stream.”
Regardless of the motivation behind the investment, the clean energy projects that will be implemented over the coming decades will require significant financial resources to fund them. Naturally, this funding will come from oil revenues, which means that if there is to be a shift to clean energy in the region, its cost will be more carbon emissions.
Conclusion
The economies of the Gulf countries are almost entirely dependent on oil resources, placing them in a difficult position between the challenges of climate change—which poses catastrophic risks to their nations and populations—and the pressures exerted by Western countries to reduce fossil fuel production. On the one hand, these nations have relied on oil revenues for decades and have a critical need for them; on the other, they fear that agreeing to cut fossil fuel production would lead to a loss of their strategic importance on the global stage, derived from their central role in energy production. This dilemma drives Gulf countries to formulate policies allowing them to benefit from fossil fuels and renewable energy. The latter offers a way to continue doing what they know best—extracting oil for decades to come—while gaining more power, influence, and accumulating additional financial surpluses.
Moreover, the Gulf’s influence in the global economy should not be overlooked, particularly through the so-called “petrodollar,” which refers to the dollar revenues generated from the sale of oil products. These surpluses are reinvested through Gulf sovereign wealth funds, primarily in Europe and the United States. These funds played a crucial role as a savior during the 2008 global financial crisis, aiming to prevent the collapse of the oil-consuming economies. The continuation of this interdependence and mutual benefit relationship could hinder any serious efforts to move away from fossil fuels in the near future, as was evident at the recent climate summit in Dubai.
This report is a translation of a collaborative effort by “Muwatin” as part of the series titled “Arab Economies and the Mirrors of Their Crises,” prepared by the “Febrayer Network.” The series features contributions from several independent Arab websites and platforms, including “Sowt,” “Raseef22,” “Mada Masr,” “Al-Hudood,” “Hekayat Ma Enhekat,” “Muwatin,” and “Aljumhuriya.net.
