Arabian Nights: Saudis Fret Over Future Oil Demand

(MoneyWatch)  Poor nations are banding together to demand aid from their richer peers to help facing climate change, with advocates including the United Nations on their side. But within the crowd of poor countries -- India, Malaysia, Vietnam and so forth -- there's an incongruous voice.

You've probably guessed it from the headline. Yes, Saudi Arabia, owner of the world's largest oil reserves, is demanding aid to help cope with climate change.

There's something mind-boggling about a country that makes almost a quarter-trillion dollars a year on a single product holding its hand out. But that dependence (oil constitutes 80 percent of revenues, according to the CIA) is what they're worried about. If demand for oil dropped significantly, the economic oasis would quickly dry up.

Despite its clear vulnerability, it's hard to imagine Saudi Arabia will get much of a hearing. But the fear might nevertheless be real. Saudi officials, speaking over the past year or two, have seemed far less confident in the world's continuing reliance on oil than Western majors like Exxon.

A recurring complaint has been Western subsidies for biofuels, a worry perhaps sparked by overly-optimistic talk of places like Brazil or the North American interior becoming the "new Saudi Arabia" with their ethanol production.

Which is why, if the Saudis are right, we may well end up offering them aid despite their wealth. The country's youthful, mostly unemployed populace, today pacified with the country's never-ending wealth, will become a ticking time bomb if oil demand dries up. And a sudden implosion of the country would cause far more collateral damage than the world economy could sustain.

The scenario would still seem unlikely, if not for recent events; Saudi Arabia could just be the next institution that's "too big to fail". I shudder to think of the size of the bailout.