Riyadh: In the desert outside Riyadh, young Saudis spend entire nights drag racing. There are few other options for entertainment in the kingdom and such car races are an economical way of letting off steam.
Thanks to government subsidies, petrol costs only 12 cents (44 fils) a litre in Saudi Arabia, making it cheaper than bottled water.
The same subsidy system also holds down the prices of drinking water and electricity consumption in a country where almost all buildings are air-conditioned.
In total, the Saudi government spends 76 billion Saudi riyals (Dh73 billion) on water subsidies every year and at least 50 billion riyals on holding down electricity prices, according to John Sfakianakis, chief economist at Banque Saudi Fransi.
As a country without lakes or rivers, the kingdom must use some of its oil to power desalination plants that take water from the Gulf and the Red Sea.
Officials complain that waste of energy and water, encouraged by subsidies, cannot be allowed to continue or the world's biggest oil exporter might face an energy crisis of its own. The danger is that Saudi Arabia will use an ever higher proportion of its oil production of 8.8 million barrels a day for its domestic needs, leaving less and less for export.
Resistance
But any reduction in subsidies is often met with enormous resistance in a country where people feel entitled to the government's largesse. After all, subsidies are the main method of redistributing the kingdom's oil wealth to the population at large. This hugely expensive system is part of the political settlement in Saudi Arabia.
With popular revolts shaking the region, analysts say the kingdom's rulers are unlikely to risk the anger that could arise from reforming the subsidies. So far, King Abdullah Bin Abdul Aziz has managed to avoid the protests that have swept the Arab world. Instead, he unveiled a mammoth package of economic benefits worth 135 billion riyals when he returned to the country in February after medical treatment in the US. Wage bonuses, along with unemployment and housing benefits totalled 350 billion riyals.
"They need to be watching for future trends, they are using a huge amount of oil at home," said one Riyadh-based western expert. "They are aware of the problem and trying to accelerate plans for nuclear and solar energy."
The government has plans to change the country's energy mix, bringing in solar and nuclear power, to prevent soaring domestic demand from curtailing the ability to export oil.
On present trends, Saudi Arabia will soon burn most of its oil production domestically, according to Hashim Yamani, president of the King Abdullah Atomic and Renewable Energy City. At present 3.2 million barrels per day are used at home. If consumption patterns did not change, this would rise to 8 million barrels per day by 2028, said Yamani — equivalent to almost all current oil production.
— Financial Times
