Oil and water  

Reuters has an article on Saudi Arabia’s water troubles and the increasing percentage of oil production going towards running desalination plants - Oil and water - Saudi Arabia's Resource Puzzle

Water use in the desert kingdom is already almost double the per capita global average and increasing at an ever faster rate with the rapid expansion of Saudi Arabia's population and industrial development.

Riyadh in 2008 abandoned what was in retrospect clearly a flawed plan to achieve self-sufficiency in wheat and aims to be 100 percent reliant on imports by 2016. "The decision to import is to preserve water," said Saudi Deputy Minister of Agriculture for Research and Development Abdullah al-Obaid. "It's not a matter of cost. The government buys wheat at prices higher than in the local market."
…

Agriculture is the single biggest user [of water], absorbing 85-90 percent of the kingdom's supplies, according to Saudi's deputy minister of agriculture for research and development. Of that, almost 80-85 percent came from underground aquifers.

With average annual rainfall around 100 mm (4 inches), Saudi's ancient underground aquifers are its lifeblood.

But just as peak oil theorists believe the world's conventional oil supplies are at or near their peak, proponents of the peak water view have said the resource has been irreversibly drained.

Booz and Company has said some of the region's aquifers -- also referred to as "fossil water" as they contain rain that fell thousands of years ago -- have become too salty to drink.

Injecting water into oilfields has also had an impact, although sea water is now generally used to maintain reservoir pressure.

The alternative to desalination -- the energy-intensive process of converting salt water to fresh water -- robs Saudi Arabia of its other precious resource, oil, by eating up both fuel and fuel revenues.

Saudi Arabia's Saline Water Conversion Corp (SWCC) produces 3.36 million cubic meters of desalinated water per day, a daily cost of 8.6 million riyals based on the SWCC's 2009 figures -- the latest available -- when the cost of producing one cubic meter of desalinated water was 2.57 riyals. Transporting it added an extra 1.12 riyals per cubic meter.

Analysts and industry leaders say the authorities need to pass on more of the costs to the end-user to curb demand and reduce waste -- an argument that holds true for power and fuel but which requires very careful handling in the case of water.

"It is necessary to raise water tariffs," Isao Takekoh, a director at the U.S.-based International Desalination Association, said. "But it should be conducted very carefully and step-by-step because water is, needless to say, indispensable for human life."

By burning up energy, desalination reduces the amount of crude available for lucrative export markets. Takekoh estimated energy represented between 45 and 55 percent of unit production costs.

The International Energy Agency and analysts at HSBC bank estimated Saudi Arabia's rate of direct crude burning more than doubled from 2008 to 2010 because of a rapid rise in power demand and a shortage of natural gas. How much of that went to desalination is not known but experts believe it is significant.