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Monday , October 14 2019

Oil outlook: good news so far – Govts must find alternative incomes

Kamel Al-Harami
The recent publication of BP on world energy demand of 2035-2040 is a promising one for conventional oil and its producers, that oil, gas and coal will continue to be the drivers of energy, representing 75 percent out of the 80 percent forecasted in 2015.

However, this positive conclusion comes with some warnings concerning future glut, with huge oil reserves that can be extracted and will be twice the demand during the period from now until 2050, as well as that future technology can extract all types of underground oils.

The publication is not optimistic about the future price outcome and whether all producers under threat of the existence of surplus and cheaper oils will survive, especially those in the Middle East, Russia and USA. Demand for oil will be within the range of less than two percent, most of which will be from Asia. Transportation is the main driver of oil with 60 percent of the barrel, as two billion people will be driving their first car, which will be the force and main user of oil. Petrochemical industry will be the future user of oil, as it can directly convert oil to plastics and fabrics in the coming years with better returns for the sellers.

Mixed signals to all oil producers for beyond 2040 to not anticipate price range of $100 a barrel being something of the past and not be repeated with the threat of USA shale oil and renewable energy. There are no indications whether renewable energy will really be competitive with the cheap oil of the Middle East and by how much.

International oil companies can diversify and move into other energy sources, unlike oil producing countries and their companies which have a sole source of income and are stuck with it. Here is where our government must play its role of finding alternative sources of income besides oil. This is a hard and difficult task and requires international expertise as well as creation of a task force to work on finding such alternatives while we still have time and have our wealth funds as backup and last resort.

BP’s annual energy report was an eye-opener, with its future trends concerning oil, gas and coal, which we should all review and use for coming up with alternatives.

The coming few years will be good for all oil owners, but our cheap oil will not remain so with the increase in our budget numbers. Oil companies can switch and diversify away from it, but can we do the same in Kuwait and rest of the Gulf countries?

e-mail: naftikuwaiti@yahoo.com

By Kamel Al-Harami

Independent Oil Analyst

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