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The Post-Oil Era: Led by Saudi Arabia?

Posted by Sara Gutterman

Apr 7, 2016 11:08:36 AM

It comes as no surprise that the world’s largest company, Saudi Aramco, is a Saudi Arabian state-owned oil empire worth trillions of dollars.  What’s unexpected is the behemoth’s plans to divest from its own oil resources, with the ultimate goal of weaning the country off its dependency on fossil fuels.

Saudi Arabia sees the writing on the wall—the end of the oil era is near.  The kingdom is planning accordingly, creating the world’s largest sovereign fund to manage its massive amounts of wealth, the goal of which is to diversify the country’s financial holdings.

The Public Investment Fund (PIF), masterminded by Deputy Crown Prince Mohammed bin Salman (second in line to the throne), will control more than $2 trillion, generated by the sale of shares in Saudi Aramco’s parent company.  

By taking the company public, selling shares, and transferring the funds to the PIF, Saudi Arabia will become a major investment player in the global market (and we’re not talking about some distant future—the initial sale of Aramco shares is scheduled for as soon as 2017.) 

This forward-thinking move “will technically make investments the source of Saudi government revenue, not oil,” says Prince Mohammed.  “What is left now is to diversify investments. So within 20 years, we will be an economy or state that doesn’t depend mainly on oil.”

Saudi Arabia, currently the world’s largest crude exporter, has been hit hard by the global decline in oil prices.  Divestment hedges against future fluctuations in an increasingly speculative market, and it prepares the country’s economy for the inevitable transition away from fossil fuels.

With its gargantuan assets, the PIF will readily place Saudi Arabia in the position to shape international markets (as a point of reference, the PIF will have the purchasing power to acquire Apple, Google, Microsoft and Berkshire Hathaway, with change to spare.)  No doubt, Saudi Arabia will certainly make an indelible mark on any industry that it deems investment worthy.

Interestingly, while Saudi Arabia is rich in oil resources, it is running out of ground water.  In fact, the country announced the phase out of all industrial agriculture, which means that it will be required to import 100% of its food in the future.

Will Saudi Arabia use its divested oil money to invest in innovative technologies that solve the country’s—and the world’s—ever-more urgent energy, food production, and water issues?  If so, that would certainly be a game changer in our efforts to amplify climate action. 

And, of course, the question must be posed: even if Saudi Arabia does make meaningful investments in sustainable technologies, is it too late to undo the destructive legacy of their oil-steeped history? 

How do you think Saudi Arabia will invest the PIF dollars?  Write to me at sara.gutterman@greenbuildermedia.com or follow me on Twitter or Facebook.

For more information about green building and sustainable living, visit Green Builder Media at www.greenbuildermedia.com, like us on Facebook, and follow us on Twitter for regular updates and breaking news.

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