Saudi Arabia's role in global energy markets is changing as it reshapes itself as a supplier of refined petroleum products, moving beyond its traditional role as a crude oil exporter. This finding is part of a new paper, "A Refined Approach: Saudi Arabia Moves Beyond Crude," by Jim Krane, a Wallace S. Wilson Fellow for Energy Studies at the Baker Institute. The paper examines the growth of Saudi refining and the country's increased domestic demand for crude oil.

"This is the type of change we expect to see as a state moves to a more advanced stage of development," Krane says. "There are plenty of upsides from investing in refining, including reducing the kingdom's reliance on fuel imports and capturing margins now lost to the competition."

The energizing factor for this shift is the ongoing development by Saudi Aramco and two joint venture partners of an additional 1.2 million barrels per day in refinery capacity in the Kingdom, the paper says.

“Refining also allows the Saudis to export their heavy crude oil to a wider array of customers, beyond the select few importers who have invested in configurations that can handle heavy crudes," Krane says.

The downsides to such a shift include eroding Saudi Arabia's role as the global “swing supplier" of crude oil, as well as a decrease in the country's ability to influence prices and balance global oil markets.

"The world's 'swing supplier' of oil may grow less willing or able to adjust supply to suit market demands," Krane says. "In the process, Saudi Arabia may have to update the old 'oil for security' relationship with the U.S,” he says. The Kingdom, instead, may turn to a more diverse set of economic and investment ties with individual companies and countries, including China.