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Saudi Arabian Oil Minister Ali al-Naimi talks to journalists during the OPEC seminar ahead of an OPEC meeting in Vienna, Austria, June 3, 2015.

LEONHARD FOEGER/REUTERS

The Saudi export strategy is becoming cruder by the day and if you are following the message trail left by Ali al Naimi, the oil minister, it can be put simply: Dump the lot while they are still buying our product.

This begs the question why the minister is still attending OPEC meetings. At a climate conference in Paris last month, Mr. Al-Naimi was bragging that the Kingdom would, in the not too distant future, be exporting gigawatts of solar power. Fossil fuels, on the other hand, were approaching their sell-by date. "I don't know when – 2040, 2050 or thereafter. So we have embarked on a program to develop solar energy," he said.

His timing on the Saudi transition from hydrocarbon molecules to electrons is probably optimistic, but his logic is difficult to fault and it is a big red flag for heavy oil producers in Canada. For Saudi Aramco, it's a bit like being a typewriter maker in the 1980s when word processors suddenly began to appear in offices. The short-term solution is to sell as much as possible and as fast as possible while you work out your long-term survival.

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In response to calls for output restraint from weaker OPEC member states, the Saudi oil minister argued the virtues of market pricing.

The price war has now done its work, he reckons, and the shale oil producers are now on the run – proof that the strategy was correct.

That is the short term message to the OPEC fraternity, but if Mr. Al-Naimi has also been spinning fancies about a Saudi solar future, it's because he is listening to the marketplace. Down in the energy bazaar, there are grumbling rumours that the world may be getting serious about weaning itself off fossil fuels.

Up until now, the OPEC nations of the Middle East have been notorious binge drinkers of oil. Thanks to massive government fuel subsidies, the Middle East alongside China and India has been underpinning the rise in global oil consumption. If it carries on, the Middle East region will be consuming more oil per capita than the U.S. by 2033 according to BP's projections. Despite sanctions and its rickety economy, Iranians increased their oil consumption by 4 per cent in 2013, a faster rate of increase than China. The reason is waste, encouraged by subsidy. According to the International Energy Agency, the fossil fuel subsidy was worth $1083 per Iranian in 2013, representing in total 22 per cent of Iran's GDP.

It is, of course, catastrophic folly and the fall in the oil price over the past year has spurred some oil consuming nations in the emerging world to end the state prop. Indonesia bit the bullet and India deregulated its diesel market but it carries on subsidizing bottled gas and kerosene to support the rural poor. Until now, the OPEC states have carried on pretending that energy has no economic cost but unexpectedly Iran has broken ranks. It remains to be seen what will be the domestic political consequence but the almost certain economic consequence will be a sharp curb on rising oil demand.

We hear a lot about self-driving electric cars and Tesla's plans to hook Californians to private power grids, but the place where solar energy will make a huge difference is in the emerging world where even coal-fired power grids still fail to reach homes and millions rely on kerosene for cooking. India's new government wants to cut oil imports which supply more than 80 per cent of demand for liquid fuel. The target is a 10 per cent cut by 2022 and 50 per cent by 2030. Prime Minister Narendra Modi has not given details but the huge fuel cost of back-up diesel electricity generators may be key. The Modi government has also signalled that it wants to increase solar power generation five-fold to 100 gigawatts by 2022.

The astonishing fall in the cost of PV panels, some 80 per cent in half a decade makes this possible in developing countries blessed with lots of sunlight. The IEA reckons that solar could supplant coal to become the biggest source of power generation by 2050, providing we have a push from carbon pricing.

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If global consumers remain unconvinced or uninterested in climate change, there is ample evidence that they are hugely motivated by their own health and that of their children. In China, air quality in the major cities has already reached poisonous levels due to emissions from coal burning as well as cars. The new public health enemy in Europe is fossil fuel particulates, notably from diesel fumes. Once touted as an efficient fuel, it is now being blamed for increases in respiratory disease and asthma in children. The EU is calling for a phase-out, France wants to ban diesel cars and in the U.K., the Supreme Court ruled in April that the government must come forward with plans to cut nitrogen oxide pollution, mainly caused by diesel fumes.

For the oil producer, it's a double whammy – a reduction in oil subsidies in developing nations and in the richer world, carrots and sticks to switch away from fossil fuels. Such a scenario poses a challenge to those who see the future of oil as a series of high price crises, only ended by the sudden invention of the perpetual motion machine. Instead, we can envisage the future as a long and diminishing tail of moderate prices and gradually shrinking volumes.

The Saudis have seen the long-term future and it doesn't work for oil unless it is very, very cheap. That is why the Kingdom will continue its drive to be the lowest cost producer, undercutting every other barrel on the market.

Carl Mortished is a Canadian financial journalist and freelance consultant based in the U.K.

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