Trends of energy demand in the Middle East: A sectoral level analysis

Abstract

Summary The Middle East region is a key player in the world energy market today. It holds approximately over 50% of the world's proven fossil fuel reserves. Yet, the region is significantly challenged by the large dependence on finite fossil fuel resources in its primary energy supply. The intricate relationship between climate change mitigation and the development of energy systems underlines great uncertainty over the future of energy development in the Middle East. Such uncertainty is greatly linked to growing energy demands and the region's capacity to transition to low-carbon energy systems. Over the past 20 years, the total primary energy demand in the Middle has almost tripled due to rapid population growth and economic development. Notably, most of the growing energy demand was concentrated in 5 countries, Iran, Saudi Arabia, Iraq, Kuwait, and the UAE. These 5 countries represented around 82% of the total primary energy demand in 2015, with Saudi Arabia and Iran alone accounted for 60%. The core question of this paper is what are the possible implications of growing energy demands in these countries and which sectors will entail significant increases in the projected energy requirements? The significance of the work presented here stems from analyzing 4 major countries that constitute the largest share in Middle East's total energy consumption and associated emissions. Examining these 4 countries together is important to highlight how future increase in these countries could largely affect the overall energy demand from the Middle East region in the next 20 years. Thus, the scope of the paper is looking at energy demand implications in 4 countries, Iran, Saudi Arabia, Kuwait, and the United Arab Emirates (UAE). Iraq is excluded from the analysis due to the large political uncertainty associated with Iraq's energy development. Here, a regression model is used to forecast energy demand from 5 economic sectors across the 4 countries using projected increase in population and gross domestic product (GDP) by 2030. Results indicate that most of the projected energy demand will be from Iran and Saudi Arabia. In addition, industry and transportation sectors will witness the largest increase among the 5 sectors examined in the paper. For instance, industry and transportation sector will collectively account for 52% and 67% of the projected energy demand in Iran and Saudi Arabia, respectively. Such results are important to highlight when ascertaining sectoral level implications of future energy demands and to determine potential areas where energy savings can be made.