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Saturday , December 10 2022

Short-term energy outlook promising

This post has been read 8204 times!

THE new COVID-19 variant and the increasing number of cases does not seem to be impacting the energy demand, but the supply seems less promising. The political situation in Europe with Russia, Germany, and Ukraine in between is creating a hard and difficult scenario of an imminent invasion and shortage of gas, particularly with the new gas pipeline Nord 2 in the waiting for one country to let the gas flow. On the other hand, oil is peaking with a new demand figure of 23.3 million barrels per day in the USA, with the Omicron crisis hitting hard in the USA and its transportation fuels of gasoline and aviation business for the coming holiday season.

Kamel Al-Harami

Meanwhile, coal is reaching a new level of consumption in the USA and in Asia particularly in China and India, which represent two-thirds of the global demand for coal, and with consumption reaching eight billion tons. The combined demand for coal from these two countries is growing by about nine percent, due to the higher gas prices, which have led power companies to shift to coal again. With the increase in gas prices, switching to coal seems to be the simplest option while waiting for the phasing-down era.

These are the challenges, and the alternatives are hard to come by at a time when Europe is being threatened by shortage of gas supply. The demand for coal is steady and there is no sign of moving away from it. The price is within the range of $260 per ton. At the same time, coal represents the largest source of carbon emission. Therefore, the policy of zero emission is not likely to happen in 2050, even though Europe has already begun phasing out of gas and is not renewing any gas agreements, which will expire by 2049, but in the absence of an alternative and agreed plan.

Invasion, which seems imminent, could cause further delays to global demand for zero emission by 2050. The short-term picture does not seem promising. The situation is hardening and creating more threats to the markets and the final consumers, as inflation will hit all pockets. However, oil and its owners will remain strong and harmonious with OPEC+, which is in charge and listening to its own readings and its own conclusions. The oil organization is mastering its oil supply/ demand scenario better than ever, and safeguarding the value of the precious black gold at a comfortable and competitive level.

By Kamel Al-Harami
Independent Oil Analyst

email: naftikuwaiti@yahoo.com

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