- Oil markets are driven by fundamentals, namely the interaction of supply and demand. The growth in demand is largely shaped by the uncertainty in the global economic outlook, the structural financial problems that have been exposed in the US and Europe, in addition to a weaker-than-expected comeback of the Chinese economy post-covid19. On the supply side, fears of the major loss of Russian oil supplies haven’t materialized to date and non-OPEC supply has been compensating for the reduction in OPEC’s production quotas.
- OPEC’s raison d’etre is to stabilize oil prices, however, that doesn’t mean that member countries don’t prefer prices to reach certain levels.
- A reduction in output by OPEC enables some member countries to increase the spare capacity which can help buffer any spikes in oil prices in the future.
- It is still premature to conclude that gas markets in Europe have surpassed the crisis of 2022 as the war in Ukraine is still ongoing.
- While Europe has largely reduced its reliance on Russian gas, some countries are still importing it via pipelines and to a bigger extent via LNG supplies.
- High storage levels and a warm winter have largely contributed to the moderation of gas prices on the continent.
- The joint gas purchasing platform in the EU was largely built to satisfy two objectives. The first is to eliminate member competition for securing gas imports and the second is to effectively compete with other gas markets primarily Asia.
- The Middle East holds more than 30% of the global gas reserves, yet it produces less than 20% of the global gas production.
- Although oil has captured interest in the region, there is a growing focus on gas. Saudi Arabia, for instance, has announced ambitious targets to develop its shale gas resources and export gas by 2030. However, in Iraq, more gas is being flared than the local market consumes.
- Pipelines in the Middle East are not well developed compared to other regions. Geopolitics have played the major role in hindering that regional integration.
- Even under the most aggressive climate trajectories, oil and gas will still contribute to a significant share of the world’s energy mix.
- Carbon Capture Usage and Storage (CCUS) technologies help moderate the environmental impact of the extraction and combustion of fossil fuels.
- Middle Eastern oil producers are likely to adopt CCUS technologies more swiftly than elsewhere given their massive financial capability that their National Oil Companies possess.
- The energy crisis in 2022 has led to the realization that the energy transition cannot happen overnight. The energy transition is about complementarity not substitution between various energy sources until the green technology becomes more established.
Watch the interview (in Arabic)
“Technology breakthroughs 2022: Energy storage“, Dr Carole Nakhle, Jan 2022
“Solving the Complexity of Energy Security and Sustainability with Digital Technology“, Dr Carole Nakhle, Jul 2022