Saudi Arabia’s new king is invigorating the country’s energy sector, Baker Institute expert says

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David Ruth
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Jeff Falk
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Saudi Arabia’s new king is invigorating the country’s energy sector, Baker Institute expert says

HOUSTON – (July 1, 2015) – Saudi Arabia’s new king, Salman, has made moves in energy policy that appear aimed at invigorating a sector that has stagnated in recent decades, according to a new issue brief from an energy expert at Rice University’s Baker Institute for Public Policy. In particular, Salman has taken steps to prepare Saudi Arabia for a new generation of leaders in the sector, the researcher found.

Credit: thinkstockphotos.com/Rice University

“Revamping Energy Policy in Saudi Arabia: A View to the Future” was authored by Jim Krane, the Wallace S. Wilson Fellow for Energy Studies at the Baker Institute, who specializes in energy geopolitics and energy consumption in Saudi Arabia and the Middle East. He is available to discuss his insights with the news media.

“The accession of a new king in Saudi Arabia and the kingdom’s intervention in Yemen have overshadowed important moves to reform two of the kingdom’s key institutions,” Krane said. “King Salman has taken steps to prepare Saudi Arabia for a new generation of leaders, both within the royal family and among the world’s largest oil export sector and its marquee company, Saudi Aramco. The changes involve installing new personalities into key positions and shifting the roles of long-serving managers.”

As it languished, control over distributed elements of the Saudi energy landscape remained disjointed, with separate agencies controlling production of electricity and water, industrial policy, and oil and gas, Krane said. For Salman to centralize the supervision of those sectors would consolidate policy in the most important economic sector in Saudi Arabia, he said. In turn, consolidation could catalyze long-overdue reforms, as long as Saudi Aramco and the profit-making petrochemical sector are given freedom to pursue paths of growth and efficiency.

“Policies that provide more autonomy to Saudi Aramco, one of the world’s most efficient national oil companies and possibly the kingdom’s most capable institution, combined with cohesive energy policymaking, would seem to be welcome developments,” Krane said. “Whether or not those are the new king’s immediate aims still remain unclear. However, Saudi Arabia is facing long-term threats to its oil export business, whether from the potential for reduced international demand — perhaps linked with climate-change policy — or from continued growth of its internal consumption. Facing these evolutionary challenges will require new and innovative policies. As the younger generation of leaders consolidates its control in the coming months, the world will gain a clearer view of whether or not the restructuring succeeds in improving the resilience of the Saudi economy.”

The reforms were ongoing at the time the issue brief was written, and their overall effect remained unclear, Krane said. “On the one hand, King Salman has launched preparations for reorganizing and consolidating oversight of the kingdom’s energy sector. On the other, he has given new political and economic powers to a young and untested son, which represents a breach with previous practice and, as some have observed, adds a dimension of risk. As is typical, the Saudi regime has provided few explanations. Overall, the moves ought to enhance the resilience of the kingdom and its economy by shifting leadership responsibilities to a younger generation.”

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For more information or to schedule an interview with Krane, contact Jeff Falk, associate director of national media relations at Rice, at jfalk@rice.edu or 713-348-6775.

Related materials:

Paper: http://bakerinstitute.org/media/files/files/a5a74964/BI-Brief-060915-CES_Saudi.pdf

Krane bio: http://bakerinstitute.org/experts/jim-krane

Krane on Twitter: http://twitter.com/jimkrane @jimkrane

Follow Rice News and Media Relations via Twitter @RiceUNews.

Founded in 1993, Rice University’s Baker Institute ranks among the top 10 university-affiliated think tanks in the world. As a premier nonpartisan think tank, the institute conducts research on domestic and foreign policy issues with the goal of bridging the gap between the theory and practice of public policy. The institute’s strong track record of achievement reflects the work of its endowed fellows, Rice University faculty scholars and staff, coupled with its outreach to the Rice student body through fellow-taught classes — including a public policy course — and student leadership and internship programs. Learn more about the institute at www.bakerinstitute.org or on the institute’s blog, http://blogs.chron.com/bakerblog.