CONCLUSION: THE CLIMATE HEDGE171WHERE NEXT?The Gulf has come a long way since roughnecks from California tapped
into a gusher at the foot of Jebel Dukhan in Bahrain. The oil business
propelled the region into the modern world before it was ready, and it
placed the Gulf at the center of the action.
Looking at the breadth of history, the Gulf monarchies face a famil-
iar decision point. Will they remain linchpins of the global economy,
providing not just energy commodities but services that capitalize on
their location and sun- drenched climate? Or will they repeat the expe-
rience of the seventh century, when they briefly enjoyed the spotlight
only to see the vanguard of their movement migrate elsewhere?
For now, the fate of the Gulf relies heavily on the fate of the oil busi-
ness. And oil is entering an age of increasing risk. Progress on climate
change endangers the dominance of fossil fuels in the global energy mar-
ket. Although no one has yet devised a viable replacement for oil- fueled
transportation, governments are increasingly demanding alternate fuels
and technologies, regardless of oil prices. This understanding will most
likely prompt at least some holders of large reserves, like those in the
Gulf, to try to move their crude to market before the world moves on.
Where does that leave the ruling sheikhs of the Gulf? Undeniably,
they face difficult choices. In the near term, it is hard to overstate the
importance to the Gulf monarchies of defending their hydrocarbon
export revenues. Despite modest success with economic diversification,
energy exports still comprise the lion’s share of GDP and government
budgets. Oil and gas sales deliver the hard currency required to buy
imported goods, to furnish social services, to build infrastructure for
industry, and to create jobs for burgeoning workforces. They also under-
pin the strategic relationship with America.
The long- term remedy is well known but infuriatingly elusive. Eco-
nomic diversification, the perennial recommendation of the IMF and the
Washington consensus, has been scrawled at the top of every economic
“vision” produced in the region since the 1980s. True diversification,