Research InterestsEnergy Systems Modeling, Energy-Economic Modeling, Economic Modeling, Large-scale Optimization, Relaxation and Decomposition Methods, Macroeconomics
Abdullah is a research lead in the Energy Macro & Microeconomics program with an interest in developing energy systems and energy-economic models. Before rejoining KAPSARC, he worked as an economic modeling expert in the telecommunications sector.
Abdullah holds a master’s degree in computer science from King Abdullah University of Science and Technology (KAUST) and a B.S. in Computer Engineering from Tennessee Technological University.
This paper simulates the sectoral and economy-wide consequences of deregulating energy prices in Saudi Arabia. Our analysis is based on KAPSARC’s general equilibrium energy model (KEMGE), a new hybrid computable general equilibrium model (CGE). The model examines the effects of full price deregulation, starting in 2019, on economic activity and revenue in the year 2030.
Structural changes in the global oil sector are disrupting conventional market dynamics and the roles played by competing and cooperating producers. Industry players are adjusting to the shale (or ‘tight’) oil revolution and the possibility of plateauing or peaking global oil demand. In particular, OPEC and Saudi Arabia, its top producer, are reshaping the organization’s role as the primary residual supplier to the world oil market. In recent years, OPEC has invited other major exporters, including Russia, to cooperate under the OPEC+ production agreement in an effort to stabilize prices.
Standard economic optimization models represent markets in perfect competition. They are commonly used, though they may not accurately represent real-world policies and regulations. Equilibrium models built using a mixed complementarity problem (MCP) approach are capable of simulating more flexible pricing structures, including regulated prices. This approach can provide a more accurate representation of real-world economic systems. However, it is significantly more difficult to develop and requires more complex formulations, as well as advanced skill sets.
Motivation and objective of the study
What if OPEC decided to abandon organizing residual production collectively, transitioning the world permanently to a competitive oil market? This commentary is based on a forthcoming KAPSARC paper, “Cooperate or Compete? Insights from Simulating a Global Oil Market with No Residual Supplier” (Rioux et al. 2020). It constructs scenarios in which OPEC members, or OPEC members other than Saudi Arabia, start behaving as competitive price takers in 2020 and stop participating as part of a collective residual oil supplier. This analysis employs a standard economic equilibrium model to simulate the transition to a purely competitive world oil market from 2020 to 2030.