The End of Oil Age
The Oil Age has powered the world for well over a century. There have been two general schools of thought about how it will ultimately end.
Meanwhile, concerns over groundwater pollution are leading to growing calls for a ban on hydraulic fracturing, the main source of increased U.S. production during the past decade.
This doesn’t mean the petroleum industry will die. Plastics, most of which are derived from oil, will continue to be important for a huge variety of consumer and industrial applications. And aircraft and ships will take longer to shift from oil-based fuels. But it does mean that consumption will shrink. Where a decade ago people talked fearfully of oil supplies running out, now some are predicting that demand for the black stuff will peak in just a few years.
Reduced demand for crude will send prices plunging, cutting into profits at oil extractors and refiners. Share prices of oil majors have drifted lower in recent years.
But the pain felt by these titans, and by smaller producers, will only be the beginning. Those companies lie at the center of a vast network of suppliers and oil-services companies, which all will feel the sting of reduced demand. And regions that depend heavily on oil-related industries will see their economies suffer. Case in point being the Saudis.
There were those who believed that oil production would peak and begin to decline in the face of high global demand. This is essentially the peak oil argument, which many laymen mistakenly understand as "The world is running out of oil."
In reality, the argument wasn't that the world was going to run out of oil, it was that oil production would begin a long decline and cause havoc in a world that is still highly dependent upon oil.
This version of the end of oil became very popular just before the shale oil boom. The idea was neatly summarized in 2005 when the late Matt Simmons published Twilight in the Desert, in which he argued that oil production in Saudi Arabia was nearing terminal decline.
In this version, there is no easy replacement for oil, so oil prices skyrocket above $100 a barrel as people seek to maintain mobility. In fact, for a while it looked like this version might play out.
But growing shale oil production largely burst that bubble in 2014, when it became clear that there was still a lot of oil to be produced.
Fast forward a few years, and a new version of the end of oil began to take hold. In this version, exponential increases in electric vehicles (EVs) and ride-sharing are predicted to be two key factors that will make oil obsolete.
In this version, oil prices plunge as demand starts to fall. This is the exact opposite of the peak oil argument, where oil prices surge as supply starts to fall.
As Michael Liberec, the founder and senior contributor of Bloomberg New Energy Finance, recently put it on Twitter: “I've always said the end-game for oil is not when it reaches $200/barrel, it's when it settles at $20/barrel.”
One thing the coronavirus pandemic has done is to collapse oil demand, and subsequently prices. The world still needs oil during this crisis, but what we are seeing today is exactly what I think we would see in the peak demand scenario.
In that case, we will see the need for a much smaller oil industry. And that is likely where we are headed now, with oil prices in the $20s, and the timing of recovery still uncertain.
What we saw in the 2005-2014-time frame was a preview of the peak oil scenario. Oil company revenues were skyrocketing during this period, and energy stocks were one of the best-performing sectors.
But today, we are seeing a preview of the peak demand scenario. That outcome is very different. In this scenario, only the strongest oil companies survive, and the sector becomes one most investors would rather avoid.
Are we there yet? I don’t think so, but it is hard to say what the lingering impact on oil demand will be from the coronavirus pandemic. When oil demand dropped during the 2008-2009 financial crisis, it bounced back strongly in 2010. This pandemic seems destined to change our world in a number of ways, and some of those ways involve lower oil demand. You can definitely get benefited with our Intraday MCX Crude tips which gets you daily profit.
Saudi Arabia to invest USD 100 billion in India
UAE and Saudi Arabia have evinced interest in investing in India’s agricultural sector.
“UAE and Saudi have decided to use India as a base for food security… Exports have been identified. India produces 290 million tonnes of foodgrain and 305 to 310 million tonnes of horticulture. So there is huge potential to export and we will be working with the state governments for this. Investment in Indian logistics sector is expected from Saudi Arabia, the UAE and 15-20 countries from other parts of the world,” says Suresh Prabhu.
“In the export policy, we have decided to remove all restrictions on organic products and processed products. Both the UAE and Saudi want to invest in both organic as well as food processing industries. This will be a win-win situation for the UAE, Saudi and other GCC countries but also for us, particularly for our farmers, who want better prices to their produce,” he said.
Prabhu said the government is keen on developing bilateral trade relations with more nations. “We as a country are supporting open trade with all the countries… but we also want to develop bilateral trade agreements with many countries. For each of the geographies we are keen to have free trade agreements with the countries in Latin America, Africa, Southeast Asia,” he said. There has been an ongoing discussion with Sri Lanka for a Comprehensive Economic Partnership Agreement “There is huge potential for agriculture exports… the Agriculture Export Policy approved by the Union Cabinet recently will give a boost not only to agriculture but also to horticulture, plantation, fisheries and dairy sectors. The policy will help fetch good price for agricultural produce, he said.
He said districts possessing potential for particular industries and items will be identified and they will be developed as clusters for the development of that sector. In pilot project to be launched, six districts from five states will be developed. “These would include Sindhudurg and Ratnagiri from Maharashtra,” he said.
He said that Global Aviation Summit 2019, to be held in Mumbai on January 15, will announce the maiden air cargo policy. He said it will promote air connectivity to export perishable agricultural goods. More than 1000 delegates from around 46 countries, including politicians, leaders in various industries, multilateral agencies, UN organizations and businesses attended the Partnership Summit. “The response has been extremely good. The summit will ensure continued partnership, investment, and bilateral trade,” Prabhu said.
Ramesh Abhishek, Secretary, Department of Industrial Policy & Promotion, said, “Our performance on the Ease of Doing Business index itself is evidence of the journey we have embarked on in the past few years.
Saudi Arabia, the world's biggest oil exporter, is also looking at investing USD 100 billion in India in areas of petrochemicals, infrastructure and mining among others, considering the country's growth potential.
Saudi Ambassador Dr Saud bin Mohammed Al Sati has said India is an attractive investment destination for Saudi Arabia and it is eyeing long-term partnerships with New Delhi in key sectors such as oil, gas and mining.
"Saudi Arabia is looking at making investments in India potentially worth USD 100 billion in the areas of energy, refining, petrochemicals, infrastructure, agriculture, minerals and mining," Al Sati said in an interview.
He said Saudi Arabia's biggest oil giant Aramco's proposed partnership with Reliance Industries Ltd reflected the strategic nature of the growing energy ties between the two countries.
The envoy said investing in India's value chain from oil supply, marketing, refining to petrochemicals and lubricants is a key part of Aramco's global downstream strategy.
"In this backdrop, Saudi Aramco's proposed investments in India's energy sector such as the USD 44 billion West Coast refinery and petrochemical project in Maharashtra and long term partnership with Reliance represent strategic milestones in our bilateral relationship," he said.
The envoy said the vision 2030 of Crown Prince Mohammed bin Salman will also result in significant expansion of trade and business between India and Saudi Arabia in diverse sectors.
Under vision 2030, Saudi Arabia plans to diversify the Saudi economy while reducing its economic dependence on petroleum products. Saudi Arabia is a key pillar of India's energy security, being a source of 17 per cent or more of crude oil and 32 per cent of LPG requirements of India.
The envoy said more than 40 opportunities for joint collaboration and investments across various sectors have been identified between India and Saudi Arabia in 2019, adding the current bilateral trade of USD 34 billion will undoubtedly continue to increase.
"There is huge untapped potential available in merchandise trade, particularly in non-oil trade and we are enhancing cooperation in economic, commercial, investment, cultural and technological fields," the envoy said.
Asked about Saudi Arabia's plan to issue initial public offering of Aramco's stock, being seen as world's largest IPO, he said it will open up the company to the wider world.
"Consistent with the vision 2030 goals, Saudi Aramco is pursuing new opportunities toward creating a world leading downstream sector in Saudi Arabia," he said.
On future energy ties with India, he said the bilateral energy ties have grown beyond the supply of crude oil, refined products and LPG to a more comprehensive partnership that focusses on investments and joint ventures in petrochemical complexes and cooperation in exploration.
"India's invitation to Saudi Arabia to invest in its strategic petroleum reserve reflects the trust and goodwill the two countries share," he said.
Talking about 'Vision 2030', Al Sati said Saudi Arabia is working towards transforming its economy and looking at a post-oil age of world-class technological research, start-up and entrepreneurial vigour.
"The entire development strategy of the kingdom rests on three pillars - to build a vibrant society, a thriving economy and an ambitious nation," he said.
"The World Bank too has ranked the kingdom as the fourth largest reformer within G20. The number of foreign investment licenses granted in Saudi Arabia in the first quarter of 2018 increased by 130 per cent," he said.
The envoy also talked about Saudi Arabia's new residency permit scheme for qualified international expatriates.
"This move is expected to attract leading global innovators and investors to live and work in Saudi Arabia, and help drive the private sector growth needed to realise the goals set out in Saudi Vision 2030," he said.
Asked whether Saudi Arabia will increase oil supply to India to address the shortfall due to curb on import of oil from Iran, the envoy said his country is committed to India's energy security and will meet any shortfall that may arise due to disruptions from other sources.
"As one of the world's leading energy producers, the kingdom will continue working constructively with other producers within and outside OPEC to maintain market stability, thus protecting all the interests of producers and consumers alike," he said.
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