The Changing face of energy in the Middle East and Globally
14.02.2022 | By Yishai Gelb
The consumption of energy globally is constantly rising. The question is, what are the energy sources. And who has a hold of those sources? An even more critical question is whether or not the market is changing and to whose benefit?
The world energy market includes fossil fuels, renewable sources of energy, and nuclear power. Fossil fuels include coal, oil, and natural gas. Renewable sources include solar energy, wind turbines, thermal energy, and bioenergy. Other sources of energy include Nuclear power and hydroelectric plants.
According to ourworldindata.org, at the beginning of the 20th century, the world consumed 12,128 terawatt-hours of energy. The primary sources were traditional biomass (50%), coal (46%), and oil (0.01%). By 1950, world consumption jumped to 28,516 terawatt-hours, with the dominant source of energy being coal (42%), oil (19%), and gas (7%). Today, the world consumes 171,240 terawatt-hours of energy, mostly from oil (30%), coal (25%), gas (22%), and hydropower (6%).
The rapid incline in the use and production of energy from fossil fuels, specifically oil and gas, is still on the rise. There is no doubt that many see the Middle East as the energy producer of the world, and that is because over 30% of all of the crude oil comes out of the Middle East, the cheapest of which comes from Saudi Arabia at just 8$ production cost, and over 40% of the natural gas reserves are in the Middle East. Of the top 10 countries with the largest oil reserves. And out of the top 10 oil-producing countries, five are in the Middle East.
While the Middle East still holds the title for being the world's energy source, the face of the energy market is destined to change in the Middle East for a few reasons.
The first is the decline in OPEC'S power. In the mid-20th Century, OPEC was founded by Venezuela, Saudi Arabia, Iran, Iraq, and Kuwait. Today, 14 countries are members. The goal was to unify local policies for keeping market shares stable. OPEC’s influence over the energy market allowed it to pressure energy-hungry countries to align with their foreign policies and even punish countries that didn't do so. For example, in 1973, OPEC embargoed the West and refused to sell oil. The consequence of their actions was that the West went to look for alternative sources of energy. Today, OPEC produces only 43% of crude oil while the United States became the top producer of oil (17%), and Canada is the fourth-largest producer (4%) thanks to fracking technology. This means that the Middle Eastern countries have less influence on the global oil market than in the past. 43% is still very significant, but not as much as it was, especially since the world is moving to alternative energy sources.
The second is the move to renewable sources of energy. In 2018, the IRENA, International Renewable Energy Agency, published a report with the forecast for energy use until 2050. The information places a realistic goal to reach 66.7% energy production from green sources by 2050. Today, 10% of all energy production is from renewables, and nuclear energy contributes another 3%, which means that 30 years from today, reaching the IRENA’s predictions is possible.
On the one hand, it seems like fossil fuels will lose their importance in the energy market only farther down the road. Still, for the time being, fossil fuels will continue to dominate world energy production, especially gas. Many developing countries are transforming their electric plants from coal to gas. Since 40% of gas reserves are located in the Middle East, the Middle East will remain a significant player in the energy market for the coming centuries.