Saudi Oil Minister: Switching to Renewables too Fast Could Bring About “Nightmare Scenario”

Saudi Arabian Oil Minister Ali Naimi (image: wsj.com)

Yesterday, at a meeting of oil executives from around the world in Houston, Saudi Oil Minister Ali Naimi made a speech that warned against shifting from oil to renewable energy sources too quickly, the Wall Street Journal’s Environmental Capital blog reported this morning.

An attempt to phase out oil-based energy sources and switch to renewable power could cause a “nightmare scenario” in which renewable energy sources cannot be developed fast enough to meet energy demand, causing a spike in oil prices.  A sudden surge in development of renewable energy sources would result in a major divestment from petroleum-based sources, he warned, causing conventional sources to be underdeveloped and unable to fill the energy supply gap.

“A prudent approach demands we recognize that the massive scale of the global energy system makes rapid change costly and impractical,” he said.

It is not surprising that a representative of the world’s largest oil-producing nation wold use such strong language against a fast changeover to renewable energy sources, especially with a U.S. president who is putting unprecedented emphasis on moving away from fossil fuels.  As the world’s largest oil consumer, the an American switch from oil to domestic renewable energy sources would mean billions of dollars of lost income for Saudi Arabia.

Aside from representing the interests of his country, Naimi’s comments do hold some water.  Regardless of how quickly the U.S. switches from conventional to renewable power sources, the recent downswing in oil prices could be laying the foundation for a new price spike.  If too many resources are taken away from oil resource development, and if oil production is slowed down too much, it may be too  damaged to meet resurgent demand that will accompany economic recovery.

As with many things in things in the oil industry, no one can predict for sure how an economic recovery and its effects on oil prices will play out.  Only time will tell.