If you needed any further evidence of the upward momentum of oil prices, witness Iran, where the price of gasoline is a small fraction of what it is here in the United States due to the country’s vast domestic reserves and heavy government subsidies. This week, reports came out that the Middle East’s largest carmaker, Iran-Khodro Company (IKCO,) will improve the average fuel economy of its vehicles to the equivalent of 32 mpg this year.
As an carmaker based in the “Axis of Evil” with no sales in the United States, IKCO doesn’t have to worry about meeting CAFE or any other standards. So why would a company based in a country where gas costs less than a 50 cents per gallon worry about fuel economy?
Because the Iranian government apparently views oil as too valuable to waste on the domestic market. Several years ago, Tehran began making moves toward transitioning its cars from petroleum to compressed natural gas—which is expected to remain cheap and abundant for most of this century.
In Saudi Arabia, renewable solar generation is poised to help remove petroleum as the kingdom’s leading source of energy within the coming decades. Last month, the Saudi government announced a $100 billion investment in nuclear and renewable energy, with the stated goal of increasing the amount of oil available for export.
“The use of alternative sustainable and reliable resources reduces dependency on hydrocarbons and keeps them as a source for income for future generations,” said Khalid Al Sulaiman of the King Abdullah City Center for Atomic and Renewable Energy, as reported by Forbes. “To [meet] growing energy demand and maintain long-term economic prosperity, it is critical that the Kingdom add new power generating capacity while reducing the amount of fossil fuels used to produce electricity.”
By 2030, the Saudis will attempt to replace 20 percent of their energy generation with renewables, making up the rest of the difference with nuclear power.
Saudi Arabia, Iran and IKCO all realize—and recent investments solar power and electric vehicle technology in other Middle Eastern countries confirm—that as world demand for gasoline increases, so too does the economic argument for selling oil to countries like the United States and China instead of giving it away at home for nickles on the dollar. Every gallon of gasoline the Saudis and Iranians save means one more gallon to sell on the world market—and more money in the coffers of their governments.