Oil is not going to end, the oil era would be – Journal

Now that a third party, an independent audit confirmed that Saudi Arabia's proven crude reserves exceeded a little what Riyadh claimed, the question that is coming into circulation is why the influence Saudi Arabia on the oil markets and, hence, its geopolitical weight, has been on a slippery slope in recent years?

Most people will agree that Riyad has definitely lost some of its political weight related to crude oil in recent years. Despite Saudi insistence on a stronger US military response to the regime of President Bashar Al-Assad, the Obama regime of the time has not exceeded the red line as Riyadh wishes. This is because Washington was no longer dependent on Saudi crude as it was a decade or two ago.

Riyadh was not able to force Washington to change its political course in the region as the rough ties between the two countries erased gradually.

The US Secretary of Energy, Steve Chau, during his first term, during a conversation with this correspondent, confessed frankly.

Saudi control in the oil markets has slipped. A number of factors have contributed to this. The increase in crude oil production in the United States, thanks to the shale revolution, has been one of the most important and decisive factors.

The presence of crude oil has been recognized in shale deposits for decades.

Yet it was economically impossible to crack the reserves until the shale revolution took precedence over the industry. The impact of the shale revolution has been so huge that the United States is now the world's largest oil producer.

The $ 100 era in 2007-2008 has contributed immensely to the realization of the shale revolution. Fixed costs for shale development projects, such as horizontal drilling and horizontal fracturing, have become possible.

And once the fixed costs were calculated, it was enough to play with variable costs to put on line new shale projects.

The revolution seems almost impossible to stop at this stage.

According to forecasts by the New Energy Information Administration, US production could even exceed 16 to 18 million barrels a day over the next few years.

It was inconceivable even a few years ago. The United States is also emerging as an exporter of raw products and a battle of market shares could well be played out on the crude horizon between the Organization of Petroleum Exporting Countries (OPEC) and the United States. United States.

And today, it is the United States, not Saudi Arabia, that balances global crude markets. This entails important geopolitical consequences.

And the United States is not the only opponent of Saudi domination of the world crude balance.

Russia has also outstripped Saudi Arabia in terms of crude production – relegating the oil kingdom to third position – in world production.

But Saudi control over the global supply-demand scenario of crude is not only attacked on the supply side, it is also facing a challenge on the demand side.

Global demand is also under cloud, with some experts now insisting that the destruction of demand may already be underway.

And the reason for this speculation is obvious. The demand is essentially – still – based on the transport sector. This sector is responsible for nearly 70% of global consumption and any change in the dynamics of this sector will inevitably have an impact on global consumption, hence projections of gross demand.

Environmental considerations, gas emissions, rising global temperatures and the increasing emphasis on efficiency are contributing factors.

In recent months, the growth of the use of electric vehicles around the world, including in developing countries, with a leading role for China, is starting to affect the crude consumption habits .

Last year, Chinese electric vehicle sales broke the 1 million mark. The state of the world economy also has an impact on the "raw psyche" of the world.

Sheikh Ahmad Zaki Yamani, a former minister of the oil industry in the 1970s and early 1980s, has been saying for ages that "coal has not ended, the coal age has died out"; which implies that oil will not end, but that the era will be.

The decreasing influence of Riyadh on world crude markets is apparently the advent of this new era.

This means that despite huge reserves, the impact of Saudi Arabia on crude markets and hence regional geopolitics would decrease and not increase.

Posted in Dawn, January 20, 2019