Home > Economic Development > Saudi Arabia plans nuclear energy expansion, has oil implications

Saudi Arabia plans nuclear energy expansion, has oil implications

Saudi Arabia, which has defined the term “rentier state,” has decided to expand its nuclear energy production so it can devote more of its crude oil to exports.

A Saudi official said the kingdom plans to build 16 nuclear reactors by 2030. The $100 billion project will help meet the country’s energy demands, which are rising between 7 and 8 percent annually.

With oil hitting $100 per barrel, Saudi Arabia is considering increasing its output to lower oil prices. That should raise consumer demand and potentially generate even greater revenues for the world’s largest oil producing state. The country will attempt to reduce its own energy consumption to accommodate the increase in exports. It seems it will try to make up for that loss through nuclear energy.

It’s safe to say Saudi Arabia isn’t at risk of Japan-like tsunamis and earthquakes — the Saudi kingdom can thank Yemen and Oman for being the geographical buffer between it and the Indian Ocean — so this move makes sense for Saudi Arabia.

But the question is what happens with increased oil revenues from devoting more of the nation’s main economic driver. Currently, the kingdom keeps most of those revenues already. It recently offered citizens $35 billion of economic relief in hopes of preventing revolutions that occurred in Egypt, Tunisia, Bahrain and elsewhere. But the only reason it was able to offer that abrupt aid was because it has such a vast pool of money tied up among political elite that does not get regularly redistributed throughout the rest of Saudi society.

Saudi Arabia knows the time is ripe for expanding oil output, especially if it will help lead to energy diversification — relying on oil is not sustainable and the Saudi economy is doomed if it expects that to be the cornerstone for decades to come. China is demanding more of it and nations that once allowed privatization by foreign companies have consolidated “black gold” into public control, therefore putting a damper on the international oil supply and driving up demand. But if Saudi Arabia is ever going to improve the lives of its citizens and become a truly modern nation, it needs to pump oil out of the Royal Palace and into Main Street.


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