Why the Global Energy Transition Does Not Mean the End of the Petrostate

Andreas Goldthau and Kirsten Westphal

Global Policy, 2019, vol. 10, issue 2, 279-283

Abstract: The world going low carbon is believed to put an end to petrostates, and to force incumbent oil producers to diversify their economies away from fossil fuels. This article challenges this assumption. Whether petrostates are in for the long game or end up with a ‘panic and pump’ strategy, it is argued, is a function of the lifting costs and the social costs of producing oil. What is more, the low‐carbon energy transition may well throw petrostates an additional lifeline, as fast decarbonizing OECD countries will shed some of their most energy‐intensive sectors, including refineries and petrochemicals, which opens up new export opportunities. Particularly for Middle Eastern petrostates it may therefore be very rational to further specialize in the high‐carbon segment. The policy challenge, therefore, will be twofold: managing a rapidly changing energy system in order to secure the transformation dividends it will bring, for human security and economic welfare; and balancing the (geo) political after pains of the incumbent fuels leaving the system.

Date: 2019
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