An "unrealistic" energy transition strategy that excludes hydrocarbons could fuel a surge in inflation and energy costs, Saudi Crown Prince Mohammed bin Salman warned today.
"Adopting unrealistic policies to reduce emissions by excluding some of the main sources of energy will lead to unprecedented inflation and an increase in energy prices and rising unemployment and a worsening of serious social and security problems over the coming years," he said in his opening address to the Jeddah Security and Development Summit.
The summit brought together leaders of all six Gulf Co-operation Council (GCC) countries, Egypt, Jordan, Iraq and US president Joe Biden who was in Jeddah on the third and final leg of his Middle East tour which also saw him visit Israel and Palestine earlier in the week.
The crown prince underlined the importance of reassuring investors that the energy policies that are being adopted "do not constitute a limitation of their investments," in order to encourage hydrocarbon funding and "ensure that there is no shortage of energy supply, which would affect the global economy."
"We also emphasize the importance of...pumping investments both into fossil fuels and clean technologies, and encourage this over the next two decades to meet the growing demand globally," he said.
Saudi Arabia and other Mideast Gulf officials have for many years been flagged concerns over dwindling global crude capacity as a result of diminishing investment in the oil and gas sector. Riyadh has long championed a hybrid approach to energy transition that still makes use of hydrocarbons while making the transition towards renewable energy sources. Saudi Arabia and the UAE are both taking steps to economically diversify their revenue streams away from reliance on oil, while still looking to increase their crude production capacity.
"The Kingdom will play its part," the crown prince said. "It has announced plans to increase its production capacity to 13mn b/d, after which the kingdom will not have any additional capacity to increase production." The figure refers only to capacity operated by state-controlled Saudi Aramco, and does not factor in developments in the Neutral Zone Saudi Arabia shares 50:50 with neighbouring Kuwait. Aramco has said it plans to reach this capacity by 2027.
Calls for more
The US has been one of the most vocal voices calling for additional oil supply to help ease rising oil prices, and the impact it has on households across the world. The country's inflation surged to a four-decade high of 9.1pc in June.
Yesterday, Biden stressed he is pursuing further output hikes from producers, particularly those in the Mideast Gulf.
"I am doing all I can to increase the supply for the US, which I expect to happen," he said late on Friday. "The Saudis share that urgency and based on our discussion…I expect we'll see further steps in the coming weeks."
Saudi Arabia, however, has so far held back from issuing any concrete commitments on raising oil output, with its minister of state for foreign affairs Adel al-Jubeir saying earlier today "if there is a market need, there will be steps taken to ensure that those needs are met."
Mohammed bin Salman also took the opportunity to urge neighboring Iran to "cooperate with the countries of the region" and with the International Atomic Energy Agency (IAEA) on its nuclear activities, and warned it from "interfering in the internal affairs of other countries." The crown prince's remarks come on the heels of similar comments made by Biden and Israeli prime minister Yair Lapid in Jerusalem earlier in the week.
