Economic Efficiency Modelling of Water Resources in the Kingdom of Saudi Arabia

Water is one of the most precious and valuable resources in the world generally and in Saudi Arabia specially. Situated in the tropical and sub-tropical desert region with arid climate, the Kingdom of Saudi Arabia (KSA) is exposed to dry winds and limited water resources .Therefore, the scarcity of fresh water resources poses a major challenge and affects the Saudi development plans since they realized that their supply of freshwater cannot be taken for granted. Moreover, the demand for fresh water is increasing because of population growth and household consumption pattern. This paper indicates that the Water crisis in Saudi Arabia should be a top priority for the government, since it will affect the country on all levels. It also stresses the importance of Integrated Water Resources Management (IWRM) as the solution to this crisis, using long term water demand model to show the benefits of regulating the water demand for the agricultural sector since it constitutes more than 80% of the total water demand. But this does not undermine the effect of domestic or industrial water demand, since such demand for water will soon increase due to the constant increase in the population growth rate. Historical data was analyzed to create a predictive model, this model showed that agricultural water was mostly affected by three major factors which are alfalfa, sorghum production, and the cultivated land. The analysis also showed that the specific effect of each one of those factors on the agricultural water demand by using the concept of demand elasticity. In conclusion, fresh water is a finite resource that is becoming scarce. While it's true that water is constantly being recycled through the Earth's water cycle, people are using up the planet's fresh water faster than it can be replenished.