Gulf states should not sit pretty on their oil reserves

Such huge figures indicate the importance of Gulf-Asia trade and the need to follow up on the economic conditions of Asian countries and explore appropriate strategies that benefit the region's economies.

Dynamic, rapidly growing Asian countries have outstanding potential, and their economies have become among the most important in the world. China, India, Japan, South Korea and Taiwan are some of the biggest engines of global trade.

Consumption is slowing, however, as Asia's population growth slows and its demographics change. Japan is a prime example, with stagnant growth since the 1990s and an ageing population.

Across Asia, the proportion of young people is shrinking, while the proportion of old people is often increasing, thanks to improved medicine, diets, and quality of life.

Traditional consumption of food, housing, and fuel is therefore weaker. If demand for oil also declines, this should come as no surprise, environmental concerns set aside.

Changing demographics

The Gulf states need to pay attention to how Asia is changing, both its direction and speed. The region is home to 4.8 billion people. China and India both have 1.4 billion each. While India's is on the rise, China's may shrink 2.7% by 2050.

Demographics are important. In China, the average age is 33 years, while 7.7% of its population are aged 65 or over. In India, only 5.3% of the population are aged 65 or more, and the average age is 25.

Comparatively, the Chinese are better off, with an annual per capita income of $2,758, compared to $2,090 in India. But this could all change relatively quickly. And with changed earnings can come changed energy usage.

The oil-exporting Gulf countries must watch these developments and their effects on oil demand to develop appropriate economic plans and oil production policies.

Gulf states should also look at changes in Europe, in particular around environmental legislation, energy pricing, housebuilding, and demographic variables.

Like those of Asia, oil imports by European countries have grown from an average of 11 million bpd in 2011 to 15 million bpd in 2017, although it dipped to 14.4 million bpd in 2022.

The United States remains the most important oil exporter to Europe after Norway, accounting for 13.6% of its total oil imports, while Saudi oil accounts for 9%.

Adapting and evolving

The world is changing. Economic systems need to change with them. Entrenched interests cannot be allowed to stymie and stultify change if that change will better prepare Gulf states for a future that no longer needs oil and gas.

The time to change is while the going is good. In the Gulf, which has grown used to subsidy and largesse, that means reducing reliance on the state.

Most Gulf states need to reduce public spending, accelerate the transfer of ownership of facilities and institutions to the private sector, invite foreign investment, and develop the future by improving education, including the often-overlooked vocational training.

In addition, Gulf citizens who have grown cosy and comfortable under bountiful state security blankets now find that there is a productivity problem.

Many need to wean themselves off grants and public sector salaries for jobs that add little or no value.

The Gulf states have substantial savings and sufficient resources to see them through difficult times. They should not let this put them off reform.

To diversify sources of income, institutionalise the economy, prepare for life beyond fossil fuels, and develop the Gulf citizens of tomorrow is both right and timely.

The push towards green and away from black is, after all, inexorable.