• Focus Area Energy and Economic Vulnerability Energy and Economic Vulnerability
  • Type Discussion paper
  • Date 7 March 2014
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Abstract

Saudi Arabia aims to reduce the growth of its energy demand. This paper outlines an approach that could help the country to reduce substantively its current fuel consumption and could result in a net economic gain without increasing current end consumer prices and while maintaining positive utility sector net cash flows. Using a new multi-sector equilibrium model developed by KAPSARC (the KAPSARC Energy Model or KEM), we estimate the magnitudes of the potential economic gains that different policies would generate. Our long term static version of the model reveals that an annual economic gain exceeding 23 billion USD in 2011, or almost 5% of that year’s GDP, could have been achieved while the water and power sectors continue to live within their cash flows. Our approach—which introduces investment credits for solar and nuclear and allows more natural gas consumption in the power sector—achieves almost all the benefit of raising inter-sector transfer prices for fuels to world market equivalences, but only moderately increases current transfer prices. Importantly, this gain does not require an increase in consumer prices of electricity or water.

Authors

Walid Matar

Research Fellow Walid works on modeling energy systems. He is developing or has developed the following components of the KAPSARC Energy Model… Walid works on modeling energy systems. He is developing or has developed the following components of the KAPSARC Energy Model (KEM): electric power generation, oil refining, petrochemicals and fertilizers, cement production, and iron and steel. He is also working on a bottom-up residential electricity use framework that merges microeconomics with the physical laws governing electricity use.

Expertise

  • Energy Systems Modeling
  • Optimization
  • Electricity Prices
  • Energy Efficiency and the Interdisciplinary Connection Between Energy Economics and Engineering

Publications See all Walid Matar’s publications

Frederic Murphy

Frederic Murphy

Visiting Researcher Frederic is professor emeritus, Fox School of Business, Temple University, where he taught for 30 years. He was a visiting… Frederic is professor emeritus, Fox School of Business, Temple University, where he taught for 30 years. He was a visiting researcher fellow at KAPSARC where he is participating in the development of energy models and writing policy analyses in a range of areas, including domestic energy use in Saudi Arabia, market power in world oil markets, designing and managing income stabilization funds, and China's and India's energy economies. He works mainly in the area of energy-market forecasting and energy policy analysis. Prior to joining Temple, he was at the Energy Information Administration (EIA) of the U.S. Department of Energy and its predecessor, the Federal Energy Administration, where he headed the group that did the economic impact analyses of the bills and laws passed during the Carter administration and developed and ran the forecasting models then used for policy analyses and the forecasts in the EIA Annual Report. He has authored over 100 refereed articles. In one study he was ranked in the 20 most published researchers in his field over a fifty-year span. He was the editor in chief of the journal Interfaces, an area editor for Operations Research, and the Informs Journal on computing, and the Vice President of Publications for INFORMS and its predecessor society, Operations Research Society of America. He has been involved in studying local economic policy issues, including advising the Tax Reform Commission of the City of Philadelphia, estimating the impact on jobs of building casinos in Philadelphia, and political redistricting. He also did a queueing study oil tank vessels on the Delaware River.

Axel Pierru

Acting Vice President/ Program Director In February 2023, Axel Pierru was assigned as Acting Vice President of Knowledge and Analysis for the Center. He received…

In February 2023, Axel Pierru was assigned as Acting Vice President of Knowledge and Analysis for the Center. He received his Ph.D. in economics from University Paris 1 Pantheon-Sorbonne (France). He also holds an HDR degree, which is a French accreditation to supervise research. In 2007, Dr. Pierru was appointed Chevalier dans l’Ordre des Palmes Académiques (knighthood award in the academic field) by the French Ministry for National Education. He is the recipient of the 2023 OPEC Award for the Best Energy Research Paper (issued by OPEC for the first time).

In 2011 Dr. Pierru joined KAPSARC in Saudi Arabia, after spending 15 years at IFP Energies Nouvelles (France) where he led research, consulting and training projects and taught energy economics and finance to postgraduate students.

Dr. Pierru has served in various leadership positions at KAPSARC, including as interim Vice President for Research. Since 2014 he has been a program director, and currently he leads the Energy Macro & Micro-economics Program.

He undertakes applied research that combines methodological innovation with practical relevance for policymaking. His expertise covers energy economics, policy, finance, modeling, the oil market, and commodity-exporting economies.

Dr. Pierru has a proven track record of methodological innovations with 50 journal papers to his name. He has been a key contributor to the development of novel lines of research, such as the role of OPEC in stabilizing the oil market, the economic modeling of price controls, or the evaluation of investment projects by international oil companies facing various tax systems.

He also coauthored with Denis Babusiaux the book Corporate Investment Decisions and Economic Analysis: Exercises and Case Studies (2005), which is the fruit of years of teaching, consulting and research, and contains numerous examples from the energysector.

Expertise

  • Energy modelling
  • Energy economics
  • Energy policy
  • Oil pricing and finance

Publications See all Axel Pierru’s publications

Bertrand Rioux

Bertrand Rioux

Bertrand is a research fellow focusing on the impact of market regulation and liberalization in energy markets. An experienced energy systems… Bertrand is a research fellow focusing on the impact of market regulation and liberalization in energy markets. An experienced energy systems model developer (linear optimization and mixed complementary problems), he is working on developing the KAPSARC Energy Model (KEM) as a decision support tool for analyzing price regulation in energy economies. Bertrand has contributed to the development of KEM Saudi Arabia and is the lead developer of KEM China, studying the impact of government regulation in the coal, power and natural gas markets. He was previously employed as a research assistant at the Canadian Space Agency.

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