Saudi Oil Faces Sunset as Global Energy Landscape Shifts

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Nestled in Al-Ula is the ancient city of Hegra, once a bustling Nabatean trading center, adorned with 111 intricately carved tombs against the sandstone rock faces. Over a thousand kilometers away, Riyadh, Saudi Arabia’s capital, emerges from the desert—a testament to the kingdom’s dramatic transformation from a pre-oil, largely nomadic nation into one of immense wealth.

Today, Saudi Arabia boasts the largest number of millionaires in the Middle East and North Africa (MENA), fueled by its oil and natural gas revenues. However, this rapid ascent has brought significant challenges. One glaring issue is the substantial gap in education, skills, and training among Saudi nationals, historically reliant on foreign workers for both skilled and menial labor.

The pursuit of “Saudisation,” a project spanning over 60 years, aimed to employ Saudis in the private sector. Yet, the public sector, which employs more than two-thirds of all Saudi workers, continues to be preferred due to better pay. Shockingly, some high-ranking officials have acknowledged minimal working hours, sparking concerns about work ethics.

This economic model has been sustained by the kingdom’s petroleum sector, which accounts for a vast portion of budget revenues, GDP, and export earnings. However, the vulnerability of this model became apparent during the 2020 oil crash triggered by the pandemic, causing a significant drop in Saudi Arabia’s foreign assets.

While the kingdom weathered the storm due to its fiscal reserves, a new challenge looms on the horizon—climate change. The global push for sustainable and green alternatives threatens the oil-dependent Saudi economy. With approximately 17% of the world’s proven petroleum reserves, the eventual decline in fossil fuel demand poses a substantial risk.

Saudi Arabia’s response lies in Vision 2030, a national transformation program with diverse initiatives, including green projects and a goal to generate 50% of electricity from renewables by 2030. However, experts argue that a complete departure from oil dependency within seven years may be overly optimistic.

As the world pivots towards sustainable practices, Saudi Arabia faces the dilemma of balancing oil revenues and adhering to net-zero pathways. The critical factor is time, with studies suggesting that high-capacity countries like Saudi Arabia need drastic production cuts by 2030 and cessation by 2039 to align with Paris climate targets.

Drawing inspiration from the resourceful Nabateans of Hegra, Saudi Arabia stands at a crossroads, tasked with navigating a sustainable future. The kingdom’s history need not serve as a cautionary tale but rather as a monument to the choices that shape our prosperity. While civilizations rise and fall, the legacy we leave depends on our actions.