Background

There is a fundamental concern among the Gulf Cooperation Council Countries (GCC) and the broader Middle East about the sustainability of the current economic model. As energy demand increases and the population continues to grow, it is questionable whether oil supplies can sustain domestic energy needs while simultaneously maintain profitability from its hydrocarbon exports in the long-run. “Energy consumption across the region has nearly tripled since 1990 and grew by 72% between 2000 and 2010 – about three times faster than the rate of growth across the world as a whole, driven by a growing population and the rise of energy-intensive industry – not least oil and gas extraction. This phenomenal growth of energy consumption is outstripping that of energy production across the region.”

Within the Middle East, the GCC countries, even with their small populations have been projected to have considerable oil and gas demand growth of more than 50 percent by 2030. With this growth, there are three significant issues for their energy efficiency (1) the high level of fuel subsidies; (2) the process of conversion to renewable energies; (3) and the cost and sustainability of their water sources through desalination. Renewable energy solutions are also important in addressing their astronomically high carbon emissions. The GCC only consists of 0.6 percent of the world's population, yet 2.4 percent of the world's emissions stem from there. Of the smaller oil wealthy Gulf countries, Qatar and UAE make interesting case studies for launching energy mix initiatives.

In both the UAE and Qatar, the fuel prices are less than half of market prices with a subsidization rate of 64.1 percent and 75.1 percent, respectively. Not only is domestic demand increases a result of a growing population, but maintaining artificially low fuel prices through government subsidies can be considered a major contributing factor to the increased domestic demand of hydrocarbon resources. Along with the other GCC

countries, Qatar and the UAE increasingly rely on their hydrocarbon production to meet domestic demands. Both are among the handful of countries worldwide that keep gas prices artificially low and are substantial contributors to the more than $500 billion spent annually on subsidies worldwide.