The UAE’s Energy Dilemma

Dr Carole Nakhle

Typically, when one thinks of the UAE, it is the association with oil and its vast wealth that dominates the attention. The skyscrapers crowding the small land, the golden gates to lavish palaces, the endless alleys of trees erected in the middle of the desert, and the private helicopters circling the skies, are just some examples of what oil has brought to this relatively young nation.

Increasingly, clean sources of energy have to be added to this picture. The UAE is undertaking huge efforts to switch its own energy supply away from oil and gas and towards a cleaner mix of renewables, nuclear and clean coal. Like everywhere else in the world, this is an expensive undertaking, requiring government support. Oil and gas, on the other hand, are available domestically and are relatively cheap. This poses an interesting dilemma.

UAE Primary

Today, oil is facing mounting pressure as the world tries hard to move towards a greener, cleaner future and vows to end the age of fossil fuels. At their annual summit in 2015, the G7 leaders agreed to phase out fossil fuel use by the end of the century. This year, countries including France and the UK announced they were banning the sales of petrol and diesel engines as early as 2040, while China, with the fastest growing demand for oil in the world, is racing ahead with the expansion of renewable and nuclear energy. Concerns about peak oil supply only a few years ago have been replaced by talks about peak oil demand – which, as many experts are arguing, is not far away. But if hydrocarbon revenues will really come under threat, how will petrostates, including the UAE, finance their energy transition?

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The article was first published on Oil Review Middle East, Issue 7 2017

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