2023-12-20 14:44:07
Al Jazeera Net correspondents
The COP-28 climate agreement, which calls for the gradual abandonment of fossil fuels, including coal, oil and natural gas, and the transition towards renewable and sustainable energy, has posed a major economic dilemma in the Gulf states that depend on oil as an essential resource for their national income.
The COP-28 agreement, which was recently concluded in the UAE, includes the commitment of the signatory countries to take measures to reduce greenhouse gas emissions, including reducing dependence on fossil fuels. The agreement stipulates that the signatory countries will work to transition to renewable energy sources and enhance the efficiency of… Energy use, and supporting research and development in the field of clean energy.
Following the announcement of this agreement, several questions were raised about the impact of this agreement on the Gulf countries’ oil exports and the economic challenges they will face in the future.
Opinions differed among experts in the field of energy and oil about the impact of this agreement on Gulf exports. Some believe that implementing the recommendations included in the agreement may lead to a gradual decline in demand for global oil, which may negatively affect Gulf exports. While others believe that demand for oil will remain strong in the medium term, and therefore Gulf exports will not be significantly affected.
Within the framework of the 28th session of the United Nations Climate Change Conference, countries of the world committed to taking the necessary measures to avoid the catastrophic negative effects of #ClimateCrisis. It clearly shows that no one country can achieve this alone. #Climate_Action #COP28 pic.twitter.com/YyGK7PU0Cs
– US State Department (@USAbilAraby) December 16, 2023
A thorny issue
In this regard, Kuwaiti oil expert Kamel Al-Harami says that the recommendations of the COP-28 conference regarding abandoning fossil fuels do not have a specific time frame for their implementation, in addition to that reducing global consumption of fossil fuels is a difficult and thorny issue, especially on the part of oil-producing and exporting countries.
Al-Harami said, in an interview with Al-Jazeera Net, that it is expected that the major industrialized countries’ transition to implementing the recommendations of the COP-28 agreement will lead to a decline in global demand for oil in the long term, because these countries will need time to implement policies for transitioning to clean energy. Which will lead to a decrease in its dependence on fossil fuels, including oil.
He explains that although this decline will be gradual over the coming years, it is expected to have a significant impact on Gulf oil exports.
Al-Harami adds, “Currently, the Gulf countries are facing intense competition due to the large quantities of oil coming from America, Canada, and Brazil. These countries produce large quantities of crude oil, which leads to a decline in global oil prices, because these quantities will lead to an increase in the global supply of oil.” oil, which will lead to lower prices.”
He pointed out that these quantities are putting pressure on OPEC Plus countries to reduce their production, in light of their efforts to maintain oil prices at appropriate levels, expecting the price of oil to decline in the coming days.
Facing challenges
The oil expert expected that the decline in the price of oil would put pressure on the budgets of the oil countries, including the Gulf countries, because these countries depend heavily on oil revenues to finance their budgets, stressing that to face this challenge, the oil countries must plan for the future and take measures. To diversify their economies and reduce their dependence on oil.
Al-Harami believes that to confront these challenges, Gulf countries need to take strategic measures, including:
- Diversify their economies
- Reducing its dependence on oil
- Investing in clean energy
- Development of manufacturing industries
- Promoting foreign direct investment
For his part, Saudi economist Turki Fadaq confirms that implementing this agreement reached at the COP-28 conference will take between 10 and 20 years, and therefore no effects of this agreement will appear for at least a full decade.
Fadak points out, in an interview with Al Jazeera Net, that the Gulf countries realize that the world is gradually moving towards abandoning fossil fuels, and they must keep pace with this trend, and one of the ways to achieve this is to switch to clean, renewable energy and petrochemical products.
He adds that as the world moves towards relying on renewable energy sources instead of fossil fuels, and since fossil fuels are mainly used in cars, the decrease in demand for fossil fuels will negatively affect oil exports in the Gulf countries, pointing out that because of this, the Gulf countries are seeking To transform into petroleum products that can be used in a variety of industries.
Part of the COP-28 climate conference held in Dubai from November 30 to December 12 (Shutterstock)
Long term effect
Fadak believes that this step is necessary for the Gulf countries to prepare for the future, as the global demand for fossil fuels will continue to decline in the coming years, noting that according to the latest studies, the percentage of fuel used in various means of transportation represents more than 50% of the total fuel produced globally.
Regarding whether the COP-28 agreement will affect the volume of oil produced by the Gulf countries, the Saudi economist points out that the change in production levels is in line with the change in demand levels, explaining that production levels are determined by the size of global demand, and demand levels are determined by economic growth in the country. A world in which part of the world will be replaced by alternatives that replace fuels, such as electric cars and other means of renewable energy.
In turn, economic expert Ahmed Akl believes that the decisions of COP-28 and other global climate gatherings have a medium- and long-term impact on the issue of oil, pointing out that the idea of switching from fossil fuels and dispensing with them has haunted many people for a long time, and work is being done to apply it to Reality is not easy.
Akl told Al Jazeera Net that the world’s current oil production exceeds more than 100 million barrels per day, and these are the world’s energy needs, and the existing technical and technological means to dispense with these sources and transform them into renewable and environmentally friendly sources are not enough yet, but working on them and finding solutions This is an ongoing matter, not only with the aim of preserving the environment, but also with the economic aim of countries reducing their expenditures on fossil fuels.
He expects that there will be no significant effects in the near term with regard to Gulf exports due to the “COP-28” agreement, pointing out that “with the outbreak of the Russian-Ukrainian war and with the beginning of the cessation of Russian oil supplies, we saw how all countries searched for new sources and financiers for gas and oil, and the energy sources were not Renewable energy is sufficient to meet the needs of the European market and some countries in it.”
Qatari economist Khaled Al Khater agrees with the previous opinions, who sees the difficulty of this transformation being successful, noting that even if it succeeds, it will require a long period of time.
Al-Khater, in an interview with Al-Jazeera Net, expresses his belief that the ultimate goal of this global trend is to impose a tax on oil-producing and exporting countries or the cost of the pollution that the Earth is suffering from.
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