ITT NEXUS | INVITED EXPERT PERSPECTIVE | AIM CONGRESS 2026
Keeping Eyes on Oil or on the Future
Author: Dr. Frederic Schneider
Title: Senior Fellow at the Middle East Council on Global Affairs (non-resident)
02 October 2026 | 3-minute read
ITT Nexus | Editor's Introduction
Energy security, economic diversification and the global energy transition are increasingly interconnected with questions of investment, resilience and long-term competitiveness. For Gulf economies, this creates a particularly important strategic discussion: how to balance the continuing economic importance of hydrocarbons with the investment required to build more diversified economies for the future.
Published as part of ITT Nexus’s Invited Expert Perspectives series in connection with our AIM Congress 2026 media partnership, this article by Frédéric G. Schneider examines this tension through the changing dynamics of oil markets, regional energy investment and global efforts to reduce hydrocarbon dependence. His analysis contributes an independent perspective to the broader dialogue around investment, economic transformation and the future positioning of the Gulf in a changing global energy landscape.
ITT Nexus | Editor’s Introduction
Keeping Eyes On Oil Or On The Future
By Dr. Frédéric G. Schneider
02 October 2026
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We live in strange times.Without the wars involving Iran and Ukraine, the world would be experiencing an oil glut now, a 2026 surplus of 4 million bpd according to the International Energy Agency, with new supply coming from the United States, Brazil, Canada and Guyana. Forecasts saw Brent in the $50 range. Then, the war involving Iran led to the closure of the Strait of Hormuz, damaged parts of the Gulf’s energy infrastructure and contributed to oil prices rising beyond $100. Yet, already before the war, the Gulf states were preparing to push harder into hydrocarbons, despite the then softening market, and the war-induced economic downturn has only increased this temptation.
The Gulf's dilemma did not begin with the war. For a decade, the region has been trying to square the circle of building an economy of the future to replace oil while also expanding the hydrocarbon machine that pays for everything today. This contradiction was visible long before 28 February, as Qatar Energy was planning to lift its liquefied-gas capacity from 77 to 142 million tones by 2030, and ADNOC was racing toward five million bpd of oil capacity, backed by roughly $150 billion in spending (a target it has now moved forward to 2027). These investments do not betray the belief that oil production is ending soon but rather that the Gulf can be the last producer standing.
The post-oil half of the strategy was not without problems either. Fiscal space, once thought limitless, had tightened, with Saudi Arabia's budget balancing only with oil at around $90 a barrel, public debt climbing toward a projected 45 percent of GDP, and value-added tax tripled to 15 percent. The flagship visions, sold as proof that the transition was real, were running out of steam. NEOM, the trillion-dollar city that was meant to embody the post-oil future, has been cut down almost beyond recognition: The Line, once a 170-kilometre megastructure for a million and a half residents, is now a 2.4-kilometre “opening” segment, with construction effectively suspended since last September and some $50 billion already spent. The post-oil diversification visions have, at least in part, lagged behind ambitions, while hydrocarbon expansion has proceeded on schedule.
Then came the war, and with it the temptation to rely even more on the pump.The strikes damaged parts of the region’s energy infrastructure and raised questions about the Gulf’s exposure to regional security risks, while weighing on growth forecasts across the GCC and increasing pressure on government revenues. Some Gulf producers have continued to prioritise hydrocarbon investment alongside their diversification programmes. OPEC+ spent 2026 unwinding the entire 3.5 million bpd of cuts it had been defending for three years. New hydrocarbon projects kept their timelines even as other budgets were trimmed. Most prominently, the United Arab Emirates announced its departure from OPEC in April. As Suhail Mohamed Al Mazrouei, the Emirati Minister of Energy and Infrastructure, put it, the departure gives it “a sense of freedom” to produce without being bound by a producer group. The irony is, of course, that the Gulf is unable to sell while the prices are high, because the prices are high due to the Strait of Hormuz being closed. Conversely, Gulf oil will reach the market when prices relax, and they relax because Gulf oil returns.
None of this is new and has been foreseen by Gulf leaders for decades. Saudi Arabia's long-serving oil minister, Sheikh Ahmed Zaki Yamani, put it memorably: "The Stone Age came to an end not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil." The lesson he intended was to prepare for life after it but, strikingly, today’s conclusion is to pump harder. If the oil age is ending, better to be the cheapest producer selling the most, and fast.
There is a certain logic to this, but the reasoning contains the seed of its own defeat. For a single producer, monetising ahead of the decline is prudent. But if an entire region does it at once, it simply floods a falling market and drives the price down further, destroying the very revenue the strategy was meant to capture. Instead of selling into a scarcity it can exploit, the Gulf is selling into a surplus it is helping to create, against competitors in the Americas who are unburdened by air-defence bills or stranded tankers. And the war has sprung a second trap. While for years, the argument for diversification was abstract (someday demand will peak), the conflict made that more palpable. Governments and consumers worldwide are watching the Strait of Hormuz close and energy prices surge, and they are drawing the conclusion that dependence on Gulf hydrocarbons is a risk worth getting rid of.
Again, this trend did not start with the war. Last year the world added a record 800 gigawatts of renewable capacity; solar alone delivered the single largest annual increase in electricity generation from any source in history. More than 20 million electric vehicles were sold, over half of them in China. And then the war catalysed developments. Demand for gasoline and related products in China dropped 15-20% in April, the EU published an electrification strategy to combat hydrocarbon dependence in July, Thailand announced plans to shift from LNG to renewables in August. Thus, the demand that the GCC producers are racing to monetize is being substituted away faster than stranded-asset calculations from even two years ago assumed.
None of this means the Gulf should stop producing oil. The pump keeps paying the government bills, funds the sovereign wealth funds, and buys the time the transition requires. It would be reckless to pretend otherwise, especially while the war costs keep mounting. But time bought is not a future built. The hard work, the industrial base, schools and universities, innovative and exporting SMEs, regional coordination to achieve the critical mass that no single Gulf state is large enough to achieve alone, is precisely the work that risks receiving less attention when hydrocarbon revenues appear to offer a more immediate return. The danger lies in the decades-long lock-in that investments into massive capacity expansion bring, at a moment when the rest of the world is pondering its dependence on Gulf oil, and whether it can live without it. Investing hundreds of billions in decades of future hydrocarbon production is a risky proposition today.
The pump may be a lifeline, but it is not a plan. Governments that understand the difference, those managing an orderly transition from oil to the future instead of escalating the pumping, will be the ones still standing when the war and the glut have passed.
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About Author
Dr. Frédéric Schneider is an economist specializing in the post-oil economic transition of the GCC states. He is a Nonresident Senior Fellow at the Middle East Council on Global Affairs, with research spanning Gulf economic diversification, industrial policy, trade, labor markets, climate change and political economy. He holds a PhD from the University of Zurich and has held academic positions at UC Berkeley, Yale and Cambridge. His analysis and commentary have appeared across international academic and media platforms.