Publications

Saudi Arabia’s domestic energy consumption is skyrocketing. The growth of electricity demand is particularly strong and shows a high degree of seasonality due to the need for air condition- ing in the hot summer months. Demand drivers are population growth, industrial development and a subsidy regime that encourages wasteful consumption. Saudi Arabia now faces a natural gas shortage and is seeking alternative energy sources like nuclear power and renewables in order to reduce the common practice of using fuel oil, crude oil and diesel in power stations. If unchecked, domestic energy demand will threaten oil export capacity and could compromise Saudi Arabia’s role as swing producer in global oil markets. However, a reform of the subsidy regime is politically sensitive, because citizens regard subsidies as an entitlement. The govern- ment is reluctant to touch subsidies in order to avoid the kind of political unrest that has  occurred elsewhere in the wake of the Arab Spring.