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OPEC Member Calls for Change

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The above image is for illustration and is of Reuters.

Natureworldnews.com post on how an OPEC Member calls for Change and urges Oil Producers to invest more in Renewable Energy is written by Rain Jordan.
Let us see what it is all about.

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OPEC Member Calls for Change, Urges Oil Producers to Invest More on Renewable Energy

Before a critical Opec conference, Iraq’s finance minister, one of the founding members of the global oil cartel Opec, issued an unusual plea to fellow oil producers to shift away from fossil fuel reliance and toward renewable energy.

(Photo : Getty Images)

Ali Allawi, Iraq’s deputy prime minister, urged oil producers to seek “an economic rejuvenation based on ecologically sound policies and technology,” such as solar electricity and even nuclear reactors, to lessen their reliance on fossil fuel exports.ADVERTISING

“To stand a chance of minimizing the worst consequences of climate change, the world has to radically transform the way it produces and uses energy, burning less coal, oil, and natural gas,” he wrote alongside Fatih Birol, executive director of the International Energy Agency. Livelihoods would be lost, and poverty rates will rise if oil earnings begin to fall before producer countries have properly diversified their economies.”

OPEC Meeting

Ministers from the 13 Opec member states will meet virtually on Wednesday to discuss possible output cuts as oil prices fluctuate. Opec had agreed to raise output as nations recovered from the Covid-19 epidemic, but sluggish markets have led some to propose that the rise be halted.

Last month, US President Joe Biden made a contentious appeal for Opec to raise oil output, even more, keep oil prices from increasing and help the US economy recover. But, unfortunately, his appeal was turned down.

Fuel Step Up

(Photo : Pixabay)

In an unprecedented step for the fossil fuel companies, the Opec summit may also address the climate problem ahead of the crucial UN climate negotiations, known as Cop26, set for Glasgow in November.

According to Allawi and Birol, current oil price instability, fueled by the pandemic, is merely the beginning of troubles for producers. The climate issue will not only need a shift away from oil, but it will also have a particularly negative impact on the Middle East and North Africa, where increasing temperatures are already causing severe problems.

According to the International Energy Agency’s (IEA) recent global roadmap to net-zero by 2050, global oil demand is expected to fall from more than 90 million barrels per day to fewer than 25 million barrels per day by 2050, resulting in a potential 85 percent drop in revenues for oil-producing economies.

Economic Turmoil

According to Allawi and Birol, economic hardship and rising unemployment risk causing greater discontent and instability in a region with one of the world’s youngest and fastest-growing populations.

Investing in renewables, particularly solar electricity, is an alternative to dependent on increasingly volatile oil prices. They added, “The energy industry might play a role here by utilizing the region’s tremendous potential for generating and supplying clean energy.”

Iraq is a founding member of the cartel, including Saudi Arabia, Kuwait, the United Arab Emirates, Venezuela, Nigeria, and several other African oil-producing countries. In addition, Russia and a few minor producers are included in the Opec+ alliance.

Most have been antagonistic to demands for action on climate change, while some have dismissed climate science, and Saudi Arabia, in particular, has often obstructed UN climate discussions.

Paris Agreement

The International Energy Agency (IEA) cautioned in May that if the world remains below 1.5 degrees Celsius over pre-industrial levels, as laid forth in the Paris Agreement – to which all Opec members are signatories – all new oil drilling must end this year.

When asked about the findings, Saudi Arabia’s energy minister, Prince Abdulaziz bin Salman, said at an Opec meeting in June, “I would have to voice my perspective that I feel it is a sequel to [the] La La Land movie…” But, “What makes you think I should take it seriously?”

Oil Productions

(Photo : Drew Angerer/Getty Images)

Saudi officials have toyed with climate action in the past, claiming, for example, that the nation might eventually power itself with solar energy. However, no one has urged that oil shipments be halted.

Some oil producers, on the other hand, have chosen a more dovish attitude. For example, Oman, no longer an Opec member, looks at hydrogen as a future low-carbon fuel. The UAE also focuses on hydrogen and renewable energy and has just opened a new nuclear power plant. Other nations in the area with significant renewable energy programs include Egypt, Morocco, and Jordan.

“More than at any other time in history, significant adjustments to the economic model in resource-rich nations are unavoidable,” Birol, one of the world’s leading energy economists, told the Guardian. Countries in the region have made energy transition initiatives. There are encouraging attempts [among oil producers], but attaining net-zero emissions would need far bolder steps and much larger international coordination, as it has for many other nations across the world.”

Read more: LNG Exports from Australia to China Hits Record Breaking Numbers

Related Article: Entirety of Europe Could Face a Staggering Natural Gas Crisis This Winter

Female Unemployment in the Middle East

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In this OPINION piece, Carmen Haddad wrote on Friday, 23 August 2019, that Companies need to address female unemployment in the Middle East.

The skills gap poses a genuine threat to economic progress and could leave nations stalled, millions unemployed and prosperity dwindling.

Only one in five working-age women in the Middle East and North Africa (MENA) has a job or is actively looking for one, according to the World Bank and the region has one of the lowest female labour force participation rates in the world.

If the MENA region continues along this trajectory, it could take at least another 150 years to match the current global average for female labour force participation. 

Despite good progress in some countries, challenges and inequities persist.

Increasingly, there is a realisation that the levels of female unemployment are not simply a mirror of the business cycle, but a persistent structural issue that has distinct causes and requires specific solutions that cut across socio-economic and education policies.

This not only represents a great loss of human capital, but it also seriously hinders the region’s potential for social and economic development.

Across MENA, restrictive barriers including limited mobility, restrictive laws and closed industries, coupled with long-standing political and social issues, continue to impede women’s access to the labour market.

However, one factor that stands out is that education does not always lead to employment. There is a persistent mismatch between employers and jobseekers – whether in terms of skills, attitudes or expectations.

For example, in Saudi Arabia, female enrolment in tertiary education has doubled in the last decade (68.5% in 2017 compared to 34.2% in 2007), but still only two in ten working-age women participate in the labour force.

In Egypt, unemployment among women with advanced education is almost six times that among those with basic education only, according to World Bank Development Indicators. While in Tunisia, only 41% of women are enrolled in tertiary education and they represent just 26.5% of the total labour force in the country.

This skills gap poses a genuine threat to economic progress and has the potential to leave nations stalled, millions unemployed and prosperity dwindling.

I believe that women can be change-makers for the political, economic and social development of MENA.

However, participation from governments, employers and education providers is needed to bridge the gender gap, increase regional output, and put MENA on a more sustainable and inclusive growth path in the long run. 

Companies can do their part by engaging in thoughtful planning, cooperating with others and getting strategic about their staffing practices. This could range from supporting access to soft and technical skills programmes, endorsing philanthropic partnerships, designing policies and spearheading discussions among the education community to pushing inclusive job opportunities.

Over the next decade, it is estimated that 50 million women will come of working age in the region. Therefore, corporations are in a unique position to bring about significant change through empowering a previously untapped human resource.

Despite increased focus and spending over the past decade, MENA governments still have a long road ahead in improving women’s social and political barriers to employment. Without a drastic overhaul of personal development and soft skills programmes, companies will continue to struggle to fill jobs across the region.

The influence and investment of companies is crucial to start to re-shape the position of women across MENA and successfully bring them into the workforce – ultimately shaping a stronger, more inclusive economy.

Carmen Haddad is the Chief Country Officer of Citigroup Saudi Arabia and the Citi Saudi Arabia Business Governance Head. Citi Foundation has partnered with international NGO Education for Employment to tackle the MENA unemployment crisis. 

* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.

Unrest in Arab States contributing to Slower Growth in MENA

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Unemployment-fuelled unrest in Arab states contributing to slower growth in MENA: IMF as published on the 28th October 2019 New Indian Express.

The unrest is, in turn, contributing to slower growth in the Middle East and North Africa region, alongside global trade tensions, oil price volatility and a disorderly Brexit process.

By PTI

DUBAI: Unemployment and sluggish economic growth are fuelling social tension and popular protests in several Arab countries, the International Monetary Fund said Monday.

The unrest is, in turn, contributing to slower growth in the Middle East and North Africa (MENA) region, alongside global trade tensions, oil price volatility and a disorderly Brexit process, the IMF said in a report on the regional economic outlook.

Earlier this month it lowered the 2019 forecast for the region — taking in the Arab nations and Iran — to a meagre 0.1 per cent from 1.1 per cent last year.

The IMF slashed its outlook for the region’s three largest economies — Saudi Arabia, Iran and the United Arab Emirates.

The risks around the forecast of earlier this month “are skewed to the downside and are highly dependent on global factors,” the IMF said in its report on Monday.

“The level of growth that countries in the region are having is below what is needed to address unemployment,” said Jihad Azour, the IMF’s director for the Middle East and Central Asia.

“We are in a region where the rate of unemployment at the youth level exceeds 25-30 per cent and this requires growth to be higher by 1-2 per cent” in order to make a dent in joblessness, Azour told AFP in an interview.

The IMF report said that high unemployment was worsening social tensions in Arab countries.

“Unemployment averages 11 per cent throughout the region versus seven per cent across other emerging market and developing economies,” it said.

“Women and young people are particularly likely to be out of work, with more than 18 per cent of women…without jobs in 2018.” Violent protests have broken out in several Arab countries since early 2010 and turned into bloody civil wars in Syria, Yemen and Libya.

A new wave of demonstrations erupted over the last year in Algeria, Sudan, Iraq and Lebanon, typically demanding economic reforms and action against corruption.

In Lebanon, where protesters have brought the country to a standstill with demands for a full overhaul of the political system, the economy grew at a very slow pace over the past few years, Azour noted.

“The government has to act firmly and swiftly in order to address those imbalances, bring confidence back by addressing the fiscal situation, and lower expenditure,” he said.

The IMF also said that public debt levels were very high in many Arab countries — exceeding 85 per cent of gross domestic product (GDP) on average, with rates of more than 150 per cent in Lebanon and Sudan.

“Having built over many years, the cost of public debt burdens has become sizeable, preventing investments critical to the region’s long-term economic future,” it said.

The IMF said that Iran, which is subject to crippling US sanctions, has entered a steep economic recession and faces a battle against spiralling inflationary pressures.

The Islamic republic’s economy is projected to contract by 9.5 per cent this year after posting negative growth of 4.8 per cent in 2018.

Iranian authorities must align “the exchange rate close to the market rate and also reform the financial sector…and try to address some of the implications of the high level of inflation,” Azour said.

As a result of the sanctions, Tehran is believed to be exporting only around 500,000 barrels per day of crude, down from over two million bpd before the sanctions.

The IMF said that oil-rich Gulf Cooperation Council (GCC) states, led by Saudi Arabia, are expected to grow by just 0.7 per cent this year from 2.0 per cent in 2018 due to lower oil prices and output.

“GCC economies need to diversify and grow out of oil and this requires them to accelerate the reforms that have been started in the last four to five years,” Azour said. Stay up to date on all the latest World news with The New Indian Express App. Download now (Get the news that matters from New Indian Express on WhatsApp. Click this link and hit ‘Click to Subscribe’. Follow the instructions after that.)

Challenges for Saudi jobs market

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ZAWYA #jobs of 18 April 2019, elaborated on the slowing growth that appears to be creating challenges for the Saudi jobs market, hence:

Hiring activity in the kingdom remains ‘subdued’, according to ICAEW/Oxford Economics survey.

Slowing growth creates challenges for Saudi jobs market

Image used for illustrative purpose Members of the Chambers of Commerce in the Saudi capital Riyadh vote for a new president of the commercial body in rare elections November 11, 2008. REUTERS/Fahad Shadeed By Michael Fahy, ZAWYA

Growth in Saudi Arabia’s economy will slow slightly this year, creating a challenge in terms of generating enough jobs for its citizens, an economist has told Zawya.

A new Economic Insight: Middle East Q1 2019 report published by accountancy body ICAEW (Institute of Chartered Accountants in England and Wales) and Oxford Economics said that it expects economic growth in the Kingdom to slow marginally in 2019 to 2 percent, down from 2.2 percent in 2019 as oil revenue falls due to Organization of the Petroleum Exporting Countries-mandated production cuts and “only a modest acceleration in non-oil activity” due to the challenging business environment.

The report said that although it expects growth in Saudi Arabia’s non-oil sector to grow by 2.6 percent this year, supported both by an expansionary fiscal policy and reforms aimed at boosting the private sector, hiring activity remains “subdued”.

Mohamed Bardastani, ICAEW economic advisor and Middle East senior economist at Oxford Economics, told Zawya in a telephone interview that the jobs market in Saudi Arabia has been “extremely challenging, and we don’t see it changing any time this year”.

He explained that that in the two years between the end of 2016 and the end of last year, the country’s Labour Force Survey showed that more than 1.5 million jobs were lost among expats –  a result of “the economic slowdown, various fiscal consolidation measures, but most importantly the measures that the government took in terms of applying expat levies and expat dependent fees on private sector companies”, Bardastani said.

“The private sector, historically speaking, has been relying on expat workers. Around 80 percent of the private sector is made up of expat workers. So obviously, this will have ramifications on growth,” he said.

Moreover, unemployment among Saudi nationals remains stubbornly high at 12.7 percent, considerably above the 7 percent target set under the kingdom’s Vision 2030 goals.

“Historically speaking, the public sector most of the time absorbed the new job entrants. This is one of the main challenges in Saudi right now. I think it is the most pressing challenge, where you have around a 12-7-12.8 (percent) unemployment rate and you have around 400,000 graduates (each year), and then job creation is relatively weak,” he said.

Tough choice

Bardastani said that the government faces a difficult choice, “between either absorbing those new job market entrants and increasing its spending, which will lead to higher budget deficits” or continuing to push through reforms in the expectation that they create enough opportunities for private sector companies to generate jobs.

“I think, for sure, that’s going to take some time,” he said.

The survey also stated that it expects faster non-oil growth in the United Arab Emirates, but again a limited increase in employment opportunities.

Growth in the non-oil economy is set to increase to 2.1 percent this year, up from 1.3 percent in 2018, on the back of expansionary budgets and “pro-growth government initiatives”, such as the 50 billion dirham ($13.6 billion) ‘Ghadan 21’ initiative in Abu Dhabi, but job creation has slowed in key sectors, including services and manufacturing.

Bardastani said firms that have seen input costs rising have been unable to increase selling prices due to competitive pressures.

“So you have this squeeze in profitability margins. Many firms are becoming more efficient in terms of producing the output – they have to do more with less resources. That’s why job creation has been weak.”

A jobs survey also published on Wednesday by recruitment firm Michael Page was more upbeat on the prospects for Saudi jobseekers, stating that 64 percent of respondents were positive about the current job market in the kingdom. It also said 86 percent of respondents said that they expect the jobs market in Saudi Arabia to improve over the next six months.

In a press release announcing the survey results, Michael Page Saudi Arabia’s operating director, Domenic Falzarano, said: “Given the kingdom’s commitment to its Vision 2030, the bulk of the hiring is taking place in the financial services, infrastructure, entertainment, tourism and healthcare sectors.”

(Reporting by Michael Fahy; Editing by Mily Chakrabarty)

(michael.fahy@refinitiv.com)

After 60 years, what future for OPEC

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In the face of new global energy changes, going through these traumatic times, and after 60 years, what future for OPEC, can we expect of this organisation.

OPEC was established on September 14, 1960 and celebrated its 60th anniversary with a declining share in both energy decision-making and global marketing. With the coronavirus outbreak despite a substantial drop in production, prices are struggling to recover to 2019 levels.  With a crisis like no other, since the 1928/1929 crisis, at a time when the interdependence of economies was low, no expert, able only to develop scenarios, can predict whether consumer and investment activities will be able to rebound, depending on the control of the epidemic. However, a high growth rate in 2021 compared to a negative growth rate in 2020 would mean it recovers, and in any case, the level of 2018/2019 will not be reached until 2022. However, the growth of the world economy and the future energy consumption model for 2020/2025/2030 are the fundamental determinants of the price of oil/gas, as the market has experienced ups and downs have not yet reacted favourably to the various OPEC decisions.

OPEC was created on September 14, 1960, at a Baghdad conference mainly on the initiative of the Shah of Iran, the Saudi Abdullah Tariki and the Venezuelan Juan Pablo Pérez, with initially only five member countries: Saudi Arabia, Iran, Iraq, Kuwait and Venezuela. Other producers joined such as in Africa, Algeria joining in 1969 was the first country to nationalise its hydrocarbon production;  Angola:  member since 2007. One of the largest areas of exploration, mainly conducted as production by the major oil companies of the OECD;  Congo:  the last member country to join the organisation (in the summer of 2018); Gabon:  a member who left the organisation in 1995 and rejoined it back in July 2016; Equatorial Guinea, a country that joined OPEC in May 2017; Libya:  member since 1962. Immense potential for untapped exploration due to the conflict in that country;  Nigeria: OPEC’s least nationalised oil industry. In South America:  Venezuela a country with the world’s largest oil reserves thanks to its oil sands resources but currently experiencing a severe political and economic crisis; Ecuador,  which was a member of OPEC between 1973 and 1992 and then again in 2007 In the Middle East:  Saudi Arabia as a founding member. The traditional leader of OPEC and the second-largest producer in the world with the largest conventional reserves; the United Arab Emirates, a member since 1967, a significant producer; Iran, founding member, OPEC’s second-largest producer and fourth-largest exporter of crude oil in the world before sanctions; Iraq: a founding member with the world’s largest open-air reserves; Kuwait: a founding member, a unique deposit whose peak production is declining. Qatar, a country that announced that it would leave the organisation in January 2019, officially to focus on its gas production. 

Since 1982, OPEC has had a system for regulating production and selling prices using a total amount of production (slightly more than 30 million barrels of crude per day). This volume of production, defined according to member countries’ reserves, is adjusted according to the needs of the consumer countries. The system of production quotas by member country was agreed in 2011 and negotiations have been expanded since the end of 2016 with other non-OPEC producers, Russia, produces as much as Iran, Nigeria, Venezuela, Algeria and Ecuador combined. However, the functioning of this regulatory system is affected by fluctuations in the price of the dollar, the transaction currency of oil: the purchasing power of producing countries decreases when the dollar falls and vice versa. 

OPEC manages a quantification instrument: the OPEC basket (ORB) which sets a benchmark price based on the costs of fifteen crude oils type (one per member country). The different qualities type reflect the major crude exports of member countries (e.g., the “Arab Light of Saudi Arabia). This basket is competing with the WIT and the Brent, whose prices are usually only a few cents different. Production and price management is extended by periodic assessment of available reserves. For all these countries, oil and gas revenues contribute significantly to their development through taxation. Still, these being very fluctuating over time and depending on the number of inhabitants of a country. For example, according to the EIA (2019), oil revenues in 2018 amounted to $14,683 per capita in Kuwait (nearly 4.2 million inhabitants), compared to only $212/hab for Nigeria (-200 million inhabitants). When the dollar falls against other currencies, OPEC states see their revenues decline for purchases in different currencies, which reduces their purchasing power as they continue to sell their oil in dollars. Local constraints (political instability, wars) or international crisis (embargo, sanctions) also affect the availability of the oil resource and thus its price. Always according to the IEA, in 2018, OPEC states as a whole benefited from a total of about $711 billion in oil revenues compared to $538 billion in 2017, due to higher average crude oil prices and higher exports, where Saudi Arabia benefited of $237 billion in 2018, ahead of Iraq with $91 billion.

OPEC decisions have, for some time, had some influence on the world’s oil price. Beyond the economic context, OPEC’s action on oil price developments is closely linked to the geopolitical environment. The organisation’s influence, however, has diminished since the 1990s, as has its share in world oil production. 55% in 1970, 42.6% in 2017 and about 38/40% in 2019 and indeed an even lesser rate is expected in 2020. One example is the oil crisis of 1973 during the Yom Kippur War: OPEC’s embargo on Western countries that support Israel caused a fourfold increase in the price in five months from October 17, 1973, to March 18, 1974. However, this historical version of the first oil shock is highly questionable.

On the other hand, from 1983, the price of a barrel collapsed, and from then on, would no longer be controlled by OPEC for several years. The London futures markets (ICE) and New York (NYMEX) playing an increasing role in determining prices, took over the pricing process away from OPEC. Recall that on September 28, 2016, OPEC met in Algiers with a historic decision to limit crude oil production to a level of 32.5 to 33 million barrels per day. On November 30, 2016, in Vienna, its output from 1.2 million barrels per day to 32.5 million with an effective agreement as of January 01, 2017, and Russia’s commitment to reduce its production by 300,000 barrels per day. In May 2018, the Vienna meeting, the members signed the integration of another country: Equatorial Guinea, which then officially became the 14the member of OPEC (the sixth African country). It was in a particular context that on April 09 2020, the group of oil-exporting countries, comprised of the 13 of the OPEC and ten-member partner countries, negotiated a new agreement on a joint reduction in production: a 22% reduction in output from the ten non-quota-exempt OPEC countries (i.e. OPEP without Iran, Venezuela and Libya) and their 10 OPEC partners, the final agreement covered 10 million barrels per day less on the market during May and June, with reductions up to 8 Million Barrel per Day (MBD) between July and December 2020, and then to 6 MBD up to January 2021. The effort will be supported mainly by Saudi Arabia and Russia, the second and third largest producers in the world behind the U.S., which would each cut nearly 2.5 Mbj from a reference production smoothed to 11 MBD. The remaining 5 million barrels to be cut would be distributed among the other 18 countries in the agreement, depending on their production level over a typical reference month, which is October 2018. According to experts, discussions focused on this reference period, with each measuring its actual production capacity, having to decide whether or not to take into account condensates (hydrocarbons associated with natural gas deposits) in the reference period can also play on final quotas. The organisation hopes that the United States, the world’s largest producer, and other countries such as Canada, Norway and Brazil, will reduce their production to a total of 5 MBD. This is only a wish since the United States has indicated that it will not participate in this reduction,(the majority being private companies, U.S. laws prohibiting executive directives in the management of the private sphere) as the U.S. Department of Energy has declared that the country’s production is already declining, because the majority of marginal deposits, which are the most numerous, although costs have fallen by more than 50% in recent years, shale oil is no longer profitable below $40 per barrel

During the 1990s, OPEC’s influence with the importance of Saudi Arabia on oil price resulted in prices declining for three reasons: a) internal divergences and the violation of production quotas by some of its members, b) the failure to extend its zone of influence to new producers (Russia, Mexico, Norway, United Kingdom, Colombia) and c) the impact of the London and New York markets that significantly drive prices

So sixty years after its founding, OPEC faces also three significant challenges that have persisted since the 1990s.  
  • First,  the resolution of new internal conflicts: the rift between pro and anti-American members exacerbates these conflicts. Saudi Arabia, a traditional U.S. ally, is facing Iran and Venezuela, two of the most overtly anti-American countries in the world, challenging its influence on the organisation. Beyond ideological differences, there are therefore two trends between countries for which OPEC must above all be the facilitator of a commodity market and those wishing to make it a more political weapon.  
  • Secondly,  the rise of Russia, wherewith more than 11.3 million barrels per day, produces as much as Iran, Nigeria, Venezuela, Algeria and Ecuador combined, having pledged since late 2016, alongside OPEC to cap its production to raise oil prices. 
  • Third,  the growing production of unconventional hydrocarbons in the United States, which makes it the world’s largest producer in 2019 with more than 12 million barrels per day, has reduced OPEC’s influence. However, its hydrocarbon reserves are announced as the world’s first. Still, it will all depend on the price vector and costs that may have large reserves but are not economically profitable. New deposits discovered, particularly in Canada or off the coast of Brazil, could disrupt the global distribution of these reserves and thus significantly reduce OPEC’s share. But the critical medium and long-term decline in its influence is the new model of global energy consumption that is emerging.  

Years 2020 through 2040 could be impacted by the Coronavirus, as already shown by the reorientation of public investment in Europe. As per B.P.’s recent statement of September 11, 2020, companies should redirect their investments towards other alternative energies with the combination between 2025/2035 of renewable energy and hydrogen, the cost of which will be widely competitive compared to conventional fossils. 

By 2030, lower dependence on oil is expected by industrialised countries. In contrast, conversely, OPEC countries remain highly dependent on oil, mainly due to the absence of a sustainable economic model that can replace the oil industry. Oil revenues account on average more than half of their Pia developed a “Vison 2030” to diversify its economy. The combination of these factors weakens the geopolitical influence of the OPEC institution and acts on the price level.

The price of oil in 2020/2021 is as always fundamentally dependent on the growth of the world economy. 

For China, which is heavily demanding hydrocarbons and dependent on external markets at half-mast, industrial production is recovering very modestly. Such a decline is unprecedented in China since the country turned to the market economy in the late 1970s. According to the Asia-Pacific report released on April 8, 2020, the world’s second-largest economy could see its GDP growth limited to 2.3% over the whole of 2020, or, as per a darker scenario, be almost nil, at 0.1%. It is not to be compared to its 2019 estimated 6.1% for a population exceeding 1.3 billion requiring a minimum growth rate of 7 to 8%. As far as India is concerned, the demand for hydrocarbons will also be low because its economy is geared towards globalisation. The impact on its growth rate is evident and is still in a declining trend in 2019. After falling to 4.5% from 7.5% in 2018, it is accompanied by an increasing rate in unemployment. In addition to all potential health and social crises, its economy paralysis could lead to the breakdown of the supply chain of many global companies. India, with more than 4 million low-cost employees (Indian I.T. engineers are paid up to 5 times less than their Western counterparts) is the leading player in ICT outsourcing. Almost all of the major international groups delegate part of the management and maintenance of their digital tools to Indian companies.  For the Euro area, dependent on more than 70% on hydrocarbons, the PMI (survey of business purchasing managers) saw the most significant drop on record, after reaching 51.6 in February 2020. This index is a figure that if it is below 50, it indicates a contraction, but if above, represents an expansion of activity. For instance, the President of the European Central Bank stated “In the economies of the Euro area, for each week of Lockdown, GDPs are shrinking by 2 to 3%. The longer it goes on, the bigger the shrinking of the economy.” Growth in the euro area and the E.U. generally will fall below zero by 2020. This necessitated a $1 trillion bailout from the ECB, plus $500 billion for all ancillary institutions. For the two leading European economies, according to officials, in France, the notices give less 9%. In Germany, the leading economic institutes have forecast that Germany, which plunged by 9.8% in the second quarter of 2020, double the co. Recorded in the first quarter of 2009 following the financial crisis. For the United States of America, the job market is deteriorating at an unprecedented rate, despite the government’s injection of more than $2 trillion. With data contradictions showing the extent of uncertainty, Morgan Stanley sees GDP fall by 30%, Goldman Sachs by 24% and JP Morgan Chase by 12%. The bailout package, which is more than 9% of U.S. GDP, is a mix of non-refundable aid and hospital loans, a massive increase in unemployment insurance for individuals. But this raises the whole problem of the health care system in the United States. According to the Kaiser Family Foundation, which specialises in health issues, the average cost of family insurance in 2018 was $19,600 (about 18,000 euros), 71% funded by the employer. To keep it, a sacked employee will have to support it in full. To avoid a significant increase in the number of uninsured (about 28 million in the United States), a dozen states, mostly Democrats, have relaxed the rules for subsidised insurance underwriting.  For the global economy as a whole, and according to several international institutes, including the Institute of International Finance (IIF), Global Financial Sector Association, a note dated April 7, 2020, highlights the global economy is expected to contract by 1.5% in 2020 in the context of the COVID-19 pandemic, lowering its forecast from 2.6% to 0.4%. According to the report, I quote “our global growth forecast is now -1.5%, with a contraction of 3.3% in mature markets and growth of just 1.1%” in emerging markets, adding that there would be “enormous uncertainty” about the economic impact of COVID-19.” Over the full year, the IIF expects growth rates in the United States and the euro area to contract by 2.8% and 4.7% respectively. For its part, the IMF anticipates a “partial recovery” in 2021 provided the pandemic subsides in the second half of this year. That containment measures can be lifted to allow for the reopening of shops, restaurants, a resumption of tourism and consumption. According to the IMF, low-income or emerging countries in Africa, Latin America and Asia “are at high risk” where we have seen capital outflows from emerging economies more than triple that for the equivalent period of the 2008 financial crisis.

What are the prospects for the price of oil? 

Global oil consumption in 2019 was around 99.7 million BDD globally, according to IEA data, and OPEC countries accounted for only 40 per cent of global crude oil production.   China on a global consumption for the same period imported 11 million barrels or about 11/12% of world consumption. According to energy experts, a drop or rise of a dollar in the price of oil would mean an impact between 500 and 600 million dollars. If you take a median average of 550, the shortfall from this decision is $5.5 billion per day per year. It will therefore be a matter of establishing a currency balance of the net gain of this decision, assuming that, if the price falls to $30 or less, before this reduction, allowing the market price to be between $40/45 per barrel. If the barrel were less than $30/35, this decision would have had a very mixed impact. In September 2020, it seems that the market is reacting timidly after this reduction, knowing that the price increase will depend mainly on the return or not to ‘growth’ in the world economy. The primary determinant of demand, because the reduction of 10 million barrels per day is based on the assumption that global demand market declines by only 10/11% while the coronavirus epidemic has caused a drastic fall in global demand, up to 33% or about 30 million BPDs.  

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