Twenty-Minute Lifestyle

SOLAR GOLD rush .vs. Saudi Arabia July 19, 2009

Decoupling of Oil from world economy article on my blog received overwhelming response from all over the world. Reactions were all over the map from denial to skepticism to curiosity. Mission accomplished, at least the conversation started.

One of interesting question came from a university in UK, inquiring about the impact of OIL decoupling on Saudi Arabia. As we all know there is no other country more synonymous with OIL than Saudi Arabia.

Saudi Arabia current reality
Saudi Arabia is in an interesting position in the context of money, world economy, and politics. US president recently said that middle east peace is the hardest problem to tackle. It is further complicated by the nature of the government and demographic of the country.

Relationship between developed countries and Saudi is based on mutual benefits; OIL is the backbone of developed countries domestic economy, and foreign policy. Saudi is a buyer of lot of defense equipments (defense industry is critical for developed countries) that are of no use for Saudi.  However it seems that US (largest developed country) has a little upper hand because OIL is priced in Dollar. We all know that pricing of the OILis dependent on the relationship between Middle East and US, not demand and supply as lot of economist or people would like to believe. Without the support of developed countries OIL will be trading at dollar twenty a barrel.

How Saudi Arabia can play the game
Saudi Arabia should continue to have strong relationship with developed countries, and generate as much reserve as possible using OIL export. Saudi Arabia needs to pursue aggressive SOLAR strategy as well. From a branding point of view it means, they need to position as an Energy supplier of the world, not an OIL supplier. Some of thoughts are outlined below:

• It is very important that Saudi Arabia make huge investment in SOLAR energy plants and Technology Company all over the world.
• They currently have lot of dollar reserve. I would argue that lot of reserve should be directed to building and owning SOLAR energy capacity all over the world. Dollar will eventually lose value and they should not wait.
• Energy grids, the way electricity is transported, is a critical component of the infrastructure that requires massive investment. This is a huge investment opportunity for Saudi Arabia. Best thing is that this investment will have no resistance from the receiving country. Off course the country has to be friendly, otherwise they can seize the asset. It is a pure investment play.
• Significant number of countries in the world will welcome Middle East investment if it is meant for SOLAR energy production.
• Saudi Arabia will reduce it dependence on OIL as the only source of revenue. Remember there will be lot of opposition from the developed countries, because they will lose influence over Saudi Arabia,
• I think Saudi Arabia should not encourage lot of real estate development in their country. Currently this is a big source wasteful expense.

Summary
Every country will have to adjust to this reality of SOLAR GOLD over time. Middle East countries with significant reserve can take advantage of the SOLAR GOLD opportunity by investing in SOLAR power generation, solar technology company, and infrastructure  for electricity grid.

It is not possible to discuss every country in detail in this article. If you would like to discuss a county of your choice, please send me a note @bagarwal.india@gmail.com

You have a question, about Global economy, Real Estate, and Politics correlation, feel free to ask by sending email or writing a comment.

http://www.redhawkinvestments.com

Bipin Agarwal

bipin.agarwal@redhawkinvestments.com

https://twentyminutelifestyle.wordpress.com/abou