Rich Gulf countries must start factoring in an economy without oil. It is incumbent upon them to make the needed structural changes to their systems of government before they have to face smaller budgets not oil dependent. All the warning signs are there and the future can be bleak unless their economies are diversified and become less dependent on oil.
The International Monetary Fund has made clear warnings to the countries in the Gulf: Diversify, diversify and diversify starting now as the oil that made many Gulf countries extremely wealthy is a diminishing resource. The IMF’s 2017 report predicts the worst growth rate for the region since the global financial collapse in 2008.
Unless the people in the Gulf countries plan to go back to a simpler nomadic life in the dessert or return to shepherding like their ancestors. A good example of wealth mismanagement is Saudi Arabia which has been the largest oil producer in the region but has had a perennial issue with unemployment.
According to recent studies Saudi Arabia might run out of oil to export by 2030. Many Saudis feel that they wasted oil wealth in luxury and opulence and didn't make use of it in scientific advances that will benefit the country in the coming generations.
A “half oil plan” was introduced by scientist studying the effects of not oil dependent economies of the future. They continue, If we do nothing for efficiency or to invest in alternatives to oil the United States alone will consume 22 million barrels of oil every day by 2035. If the half oil plans is implemented the USA will be using 11 million fewer barrels of oil every single day by 2035. Moreover, this plan will help prevent the worst effects of climate change; it will save to the tune of $1.5 billion per day that would otherwise be spent on oil, and cut toxic air pollution to save the planet. The half oil plan can be expanded to include implementing higher efficiencies in “our buildings, and our planes, trains, and ships can save some 2.5 million barrels of oil per day.”
Also, an economic argument can be made that relies on a carbon tax. This tax can correct market failures and make the economy more efficient. One study from Tufts University, economist Gilbert Metcalf estimated that a “$15 per ton tax on CO2 emissions that rises over time would reduce greenhouse gas emissions by 14 percent,”
Although a carbon tax is not a welcome idea to US energy companies and new concept for the U.S. government, it already has been implemented in several European countries, Australia and three Canadian provinces. “California recently initiated a cap-and-trade system, which auctions carbon permits to companies and functions much like a tax.” Many carbon tax proponents admit that a carbon tax isn’t perfect but when considering the alternatives, it has an enormous amount of benefits to offer.
