Time for a wake-up call: shale boom triggering over-protectionism, threatening the Gulf
A recent wave of increased protectionism and trade barriers across the world pose a serious challenge to the GCC’s petrochemicals industry, Saudi’s deputy oil minister said on Wednesday.
“Aimed to protect industries from international competition, this protectionism will only intensify the number of petrochemical players as more countries form ambitious plans to roll out their own petrochemicals industry,” said Prince Abdulaziz Bin Salman Bin Abdulaziz.
“Such protectionist policies have an adverse effect on the regional and global industry, increase the cost for consumers and reduce global economic welfare. They decrease the productivity of industry and restrict trade.”
Speaking at the Gulf Petrochemicals and Chemicals Association forum, the oil minister also said that the recent anti-dumping measures pose serious concerns for the petrochemicals industry.
Abdulaziz said that it is natural for protectionism to beef up during times of an economic recession but made it clear that the Kingdom favours free trade.
“Saudi Arabia are in favour of free trade where those with resources in one end should deliver them while those who have the comparative advantage on other products should be the producer,” he said.
“We believe that GCC will continue to have better comparative advantage than any other gas producers.”
According to Stephen Pryor, president of Exxon Mobil chemicals, the shale gas boom in the US has triggered a round of protectionist policies resulting in trade restrictions.
Abdulaziz echoed Saudi Arabian oil minister Ali Al Naimi’s view that there is enough global demand in the future to absorb both shale and crude supplies indicating that the world’s top oil producer is least concerned with its latest competitor shale gas.
“We welcome any energy source that comes if it is produced efficiently. The world economy over the long term would require every kid of energy available,” he said.
The minister also assured that there is no need for the Kingdom to cut its crude output as the market is well balanced.
“The state of the market is relaxed, stable and well supplied,” he said.
Despite his assurance of Saudi withstanding the competition from the shale gas boom, Abdulaziz warned that the new competition calls for increased efficiency from GCC players.
“The petrochemicals industry in the GCC will face stiff competition from new players with more energy efficient plans, more available gas and greater access to technology,” he said.
“The increased global competition should be a wake up call for the GCC petrochemicals industry to rationalise and improve its efficiency.”