Oil pumps at an oil field. Picture: 123RF / PIXNOO
Oil pumps at an oil field. Picture: 123RF / PIXNOO

It appears that Saudi Arabia’s reading of geoeconomic opportunity sees the window closing for crude oil/fossil fuels. It is probably no coincidence that they’ve launched the gambit of flooding the market, thus exercising the power inherent in having the largest reserves plus low production costs, and amplifying this power — before dependence on fossil fuels really declines — at a time that a pandemic provides distraction and cover.

If Saudi Arabia is committed to milking its resource advantage by sticking with such a gambit (at least until a critical mass of competitors go down), a simultaneous collapse of demand will reduce the risk of targeted retaliation or co-ordinated multilateral response.

Reports of their contracting oil transport capacity additional to what they have, suggest an intent to play this gambit through. Exercising centralised authority (imprisoning royals) is also consistent with a strategy that requires long-term resolve; as is building up a huge arsenal while becoming a key weapons customer of the US and UK. With Aramco now an internationally listed and traded company, the Saudi elite could probably allow it to go bankrupt without collapsing their supply advantage.

On a global scale coal is already on the way down, while natural gas infrastructure is still sufficiently behind that of oil to rule out seriously undermining such a gambit. Marshalling a coherent collective response to such a last-man-standing strategy by Saudi Arabia would probably be no easier than adopting an effective multilateral response to climate change.

However, a concerted and adequate response to planetary heating and the escalating risk of runaway climate change would simultaneously serve to undermine such a strategy by a fossil energy incumbency under threat. This applies as much to coal in the SA context as it does to oil globally, except that without any cost advantage political patronage is required to sustain our coal dependency. 

Richard Worthington

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