In these difficult days, Record new renewable energy capacity this year and next: IEA by Nina Chestney sheds some light in the unending and stuffy tunnel that the world’s economy finds itself stuck-in. Wind turbines lining the roads, roof mounted solar panels generating energy for all are more and more visible even in the MENA region, oil exporters or not.
LONDON, Nov 10 (Reuters) – Record levels of new renewable energy capacity are set to come on stream this year and next, while fossil fuel capacity will fall due to an economic slump and the COVID-19 crisis, the International Energy Agency (IEA) said in a report.
In its annual renewables outlook, the IEA said new additions of renewables capacity worldwide would increase by 4% from last year to a record 198 gigawatts (GW) this year.
This means renewables will account for almost 90% of the increase in total power capacity worldwide this year.
Supply chain disruptions and construction delays slowed the progress of renewable energy projects in the first six months of this year due to the coronavirus pandemic.
However, the construction of plants and manufacturing activity has ramped up again, and logistical challenges have been mostly resolved, the IEA said.
Electricity generated by renewables will increase by 7% globally this year, despite a 5% annual drop in global energy demand, the largest since World War Two.
Next year, renewable capacity additions are on track for a rise of almost 10%, which would be the fastest growth since 2015.
“Renewable power is defying the difficulties caused by the pandemic, showing robust growth while others fuels struggle,” said Dr Fatih Birol, the IEA’s executive director.
Policymakers need to support the strong momentum behind renewables growth and if policy uncertainties are addressed, renewable energy capacity additions could reach 271 GW in 2022,the IEA said.
In 2025, renewables are set to become the largest source of electricity generation worldwide, supplying one third of the world’s electricity, and ending coal’s five decades as the topglobal power source, the report said.
Reporting by Nina Chestney; Editing by Mark Potter
If the world is to transition to a climate-compatible future, much will turn on new innovations in clean energy and whether they can be deployed at a large scale. This is especially critical for emerging economies, which are developing their infrastructure and undergoing economic growth and urbanisation at an unprecedented scale and pace, yet still often lack the support for technological innovation found in wealthier countries.
Six of these emerging economies – Brazil, China, India, Indonesia, Mexico and South Africa – contributed more than 40% of the global CO₂ emissions in 2019. That’s 1.5 times the combined emissions from the US and Europe. Yet at the same time China, India, and Brazil were the first, fourth and sixth largest producers of renewable electricity. These three countries – the largest emerging economies – are now at a crucial juncture, faced with immense potential to become major innovators in the development of clean energy technology.
In a new paper we explored how fast-growing countries can not only develop their own sustainable systems but provide a source of learning and knowledge to influence global trends. We did this by investigating specific clean energy success stories in the three countries.
India’s remarkable transition to LEDs
First is India’s 130-fold expansion of its market for light emitting diode (LED) bulbs in just five years. LED bulbs are more energy efficient and last much longer than incandescent bulbs, tube lights, and compact fluorescent bulbs. In India they are primarily being used for residential lighting and street lamps.
An equally remarkable transition occurred in China, which has become the top manufacturer and largest market of solar photovoltaic (PV) cells and modules, accounting for 69% of global production. In the past 40 years, solar panel costs have declined by more than 99%, driven recently by low-cost manufacturing in China.
A third success story is that of Brazil’s long-term growth to become the largest producer, exporter and market for ethanol biofuel made from sugarcane.
Ethanol-run vehicles increased their share of Brazil’s new car sales from 30% in 1980 to 90% in 1985. After ethanol stagnated in the 1990s, biofuels were revived by the introduction of flex-fuel vehicles which use any mix of gasoline and ethanol. Their share increased from negligible in 2003 to 85% of new cars sold just five years later – and has remained constant since.
There are some environmental and socioeconomic impacts. These include deforestation for sugarcane plantations, soil erosion, air and water pollution, and the consolidation of land ownership among large ethanol producers. But when you look at the full lifecycle of sugarcane ethanol fuel, from crop to car, its greenhouse gas emissions are lower than those from gasoline or corn ethanol.
Three lessons for the rest of the world
Based on these unexpected clean-energy transitions, we have identified three insights relevant across emerging economies.
1. Public sector enterprises are crucial
In all three cases businesses with significant equity owned by governments played a crucial role. In India, a joint venture of four public-sector utilities called EESL bought energy-efficient LED bulbs in bulk, reduced prices using competitive bidding, ran national marketing campaigns, and sold the bulbs to customers through new distribution channels.
In China, public sector enterprises provided venture capital investments and loans that enabled rapid expansion of private sector solar startups. In Brazil, the leading public oil company bridged the gap between ethanol production and consumer point-of-purchase by buying ethanol from mills, providing storage and transport, and distributing fuel through the country’s largest network of fuel pumps.
2. Domestic choices in a global economy
Second is the need to reinforce complementary links between the global economy and domestic technology choices. For example, India was able to accelerate its LED market because its bulk procurement and bulb distribution policies complemented access to China’s large scale low-cost LED manufacturing. Equally, China’s early domestic support for export-oriented hi-tech manufacturing complemented the growing demand for solar cells in Germany.
3. R&D that unites academia and industry
Finally, engagement between industry and universities and public sector research institutions is essential. For example, Brazil could develop the technology to make ethanol compete on cost with gasoline only because of strong links between public sector research institutes and industry, including the government-funded “Sugarcane Genome Project”.
Our analysis shows that it is possible for emerging economies to begin from a technologically and economically disadvantaged position and yet successfully accelerate the transition to clean energy technologies. These lessons provide good news, since success or failure in this endeavour will have long-term energy and climate consequences for all.
Bioenergy makes up a large share of renewable energy use today and plays a key role as a source of energy and as a fuel in the end-use sectors (industry, transport and buildings), as well as in the power sector. International Renewable Energy Agency (IRENA) recently released its report titled “Recycle: Bioenergy”, describing how biomass has a central role in delivering many aspects of the energy transformation and help build a climate-friendly circular carbon economy. It discusses the current and potential application of bioenergy and renewable carbon, and presents the strong economic case supporting them, including their positive externalities and socio-economic benefits. REGlobal presents a brief extract from the report as follows…
Bioenergy today accounts for 70% of the global renewable energy supply and 10% of the total primary energy supply. In terms of end uses, the largest share of total bioenergy use (modern and traditional) is in the buildings sector, which includes cooking and space heating (26%). The second largest share is in the industry sector (at 7%), followed by the transport sector (3%), mostly in the form of liquid biofuels from crops such as sugar cane and corn, and the power sector (2%).
Industry sector: The industry sector uses energy for a wide range of purposes, such as for processing and assembly, steam generation, cogeneration, process heating and cooling, lighting, heating, and air conditioning. However, most of the energy consumed in industry is in the form of heat, especially in the most energy-intensive industrial sectors – iron and steel, chemical and petrochemical, nonmetallic minerals, pulp and paper, and the food industry. Current direct renewable energy use in industry is predominantly in the form of biofuels and energy from waste. Biomass could play an expanded role for the decarbonisation of the industry sector, as it offers an established renewable energy option to provide low-, medium- and high-temperature heat, as well as a feedstock that can replace fossil fuels. At a regional level, the largest share of biomass in industry’s final energy consumption in 2017 was in Latin America and the Caribbean at 32%, followed by Asia and Sub Saharan Africa, both at 29%.
Biomass is also used for carbon emissions reductions in the industry sector through the production of natural synthetic fibres based on cellulose, and biomaterials to produce bioplastic. Biomass used for bioplastic production mainly comes from corn, sugarcane or cellulose (European Bioplastic, 2020). In 2019, according to the European Bioplastics association, the global production capacity of bioplastics reached 2.11 Mt using 0.79 million hectares of land, representing 0.02% of the global agricultural area of a total of 4.8 billion hectares. Production was concentrated in Asia (45%), followed by Europe (25%), North America (18%) and South America (12%).
Transport sector: Globally, the share of renewable energy in this sector is very small at just 3% in 2017. In road transport, the use of renewables is dominated by liquid biofuels, mostly bioethanol and biodiesel, which offer an alternative fuel for all types of internal combustion engines in both passenger vehicles and trucks. North America had the largest production of liquid biofuels in 2017, with 64 billion litres, followed by Latin America and the Caribbean with 31 billion litres and the European Union with 25 billion litres.
Liquid biofuels could also help decarbonise the shipping and aviation sectors, which currently are entirely fueled by fossil sources. The decarbonisation of these modes of transport is essential, as they make up 20% of total energy demand from transportation and are the fastest growing segments of the sector. Advanced biofuels offer significant emissions reductions compared to petrol and diesel. They can be made from non-food and non-feed biomass, including waste materials (such as vegetable oils or animal fats) and energy-specific crops grown on marginal or degraded land. They thus have a lower impact on food resources and lower probability of causing Land Use Change (LUC) and Indirect Land Use Change (ILUC). However, despite their advantages, advanced biofuels face significant barriers, such as lack of technological development, high production costs, immature supply chains and dependence on government support schemes.
Buildings sector: There are two different ways of using biomass in the buildings sector: space heating and cooking. Buildings can currently be heated using biomass through town-scale district heating systems or building-scale furnaces, both of which use feedstocks such as wood chips and pellets very efficiently. Cooking with biomass is typically one of the traditional uses of biomass in developing countries. Inefficient traditional cookstoves paired with solid fuels and kerosene emit indoor smoke that imperils the health of mainly women and children and causes nearly 4 million premature deaths every year. Unsurprisingly, the largest share of biomass consumption in the buildings sector in 2017 was in Sub Saharan Africa at 91% (entirely in the form of traditional uses). These detrimental cooking practices must be replaced with clean, efficient, modern systems that use improved cookstoves fueled with sustainably produced bioenergy such as wood, biogas or ethanol.
Power sector: Biomass and waste fuels in solid, liquid and gaseous forms are currently used to generate electricity. The feedstocks and technologies range from mature, low-cost options, like the combustion of agricultural and forestry residues, to less mature and/or expensive options, like biomass gasification or municipal solid waste generators with stringent emissions controls (IRENA, 2019c). However, electricity generation from biomass is most often provided through combined heat and power (CHP) systems. Power production from biomass is relatively flexible, so it can help to balance output over time on electricity grids with high shares of variable wind and solar power. At a regional level, in 2017 the European Union and Asia had the largest bioenergy capacity installed, a total of 34 GW each.
An important niche that has yet to be fully explored is the use of biomass residues and waste generated in bio-based industries such as pulp and paper, lumber and timber, and food processing and biofuels. These sectors usually have large amounts of biomass that can be used for energy production. To a large extent, the modern part of those industries already taps into those resources, mostly for electricity and heat generation, in stand-alone applications or co-generation systems.
Technology outlook for bioenergy and bio-based materials
Biomass, due to its versatility, could play significant roles in the industry sector. Biomass can be used as a feedstock to replace fossil fuels, it can be used to produce low-, medium- and high temperature heat, and it can be used as a fuel for localised electricity production. The versatility of biomass and its finite supply, however, also result in competition for its use within and between industry sectors, and other sectors of the economy. In IRENA’s analysis, renewable energy (including renewable electricity and district heating) could contribute 63% of industry’s total final energy consumption by 2050 (89 EJ in absolute terms). Of that total energy, 24% would be sourced from biomass (direct, bioelectricity and biomass in district heating) and the remaining 39% from other renewable sources.
Compared to current levels, energy demand in the transport sector is lower under the Transforming Energy Scenario due to efficiency improvements and other measures, such as changes in transport modes and reductions in the need for travel. Fossil fuel consumption (oil, natural gas) is sharply reduced, and there is a major increase in biofuels, which reach 17 EJ in 2050 (over five times 2017 levels) and provide 20% of total transport final energy demand. Electricity use in transport also grows sharply to 37 EJ (of which 2 EJ is bioelectricity, 29 EJ is from other renewable sources and the remaining 5 EJ is from fossil fuels), representing 43% of total transport final energy demand in 2050.
Biofuels are an important alternative to fossil fuels, particularly for long-haul transport (aviation, marine and long-haul road freight), complementing the enhanced role of electrification and other urban measures. Transport will become much more electrified, but not everywhere, not in all sectors and not all at once. While EVs powered by renewable electricity will dominate light vehicle fleets, they can only enter markets with well-developed power grids. Long-haul transport is unlikely to be fully electrified due to the higher energy density it requires. Hence, a mix of oil-based, carbohydrate-based, and lignocellulosic biofuels has to be developed and used. Conventional fuel ethanol production will also have a continuing role where production costs are low. In IRENA’s analysis, overall liquid biofuel production could increase five-fold from 130 billion litres in 2016 to 652 billion litres in 2050.
At a regional level, North America would lead in liquid biofuel production, with 183 billion litres in 2020. However, liquid biofuels have a large potential in Asia, with production increasing from 13 billion litres in 2017 to 211 billion litres in 2050. Biogas can replace fossil gas in natural gas vehicles (NGV) or so-called dual-fuel vehicles. When biogas is upgraded to natural gas quality, it forms biomethane, which can also be used as a vehicle fuel, with similar properties to natural gas. Biomethane would increase from 0.4 bcm in 2017 to 13 bcm in 2050 and could be used for public transport, waste collecting vehicles or heavy freight trucks.
Modern bioenergy use also is expected to play an increasing role in the decarbonisation of the buildings sector, particularly in areas with high demand for space heating. Buildings can be heated through town-scale district heating systems or building-scale furnaces, both of which use feedstocks like wood chips and pellets very efficiently. It is important, therefore, to replace existing low-efficiency heating systems by high efficiency district heating and cooling (DHC) or buildingscale furnaces fueled by renewable sources as much as possible.
In some cases, fossil fuel-based boilers can be co-fired with solid biomass, such as wood residues, or converted into biomass-only boilers. Biomass can also be used for both electricity and heat production in combined-heat and power (CHP) plants. Using biomass solely for electricity generation is not seen as a good choice because of its low efficiency, at about 30%. However, the overall efficiency of biomass-based CHP plants for industry or district heating can be 70%-90%. As a result, sustainable bioenergy used to provide heat and power can reduce emissions considerably compared to coal, oil and natural gas-generated heat and power.
In IRENA’s Transforming Energy Scenario, by 2050 the final energy consumption of modern biomass (solid, biogas and liquid biomass, bioelectricity and biomass in district heating) grows more than three-fold from the 2017 level in the buildings sector, from 5EJ in 2017 to 16EJ in 2050.
Under the Transforming Energy Scenario, the power sector would be transformed. The total amount of electricity generated would more than double by 2050 – to over 55 000 TWh (up from around 24 000 TWh today). The share of electricity in total final energy use would increase from just 20% today to 49% by 2050, and 86% of that electricity would be generated by renewable sources, mostly wind (35% of renewable electricity), solar PV (25%) and some hydro (14%) (Figure 6). Biomass would be the fourth largest renewable power source, generating 7% of electricity. To produce that much power, bioenergy installed capacity would increase six-fold from 108 GW in 2017 to 685 GW in 2050. Asia would lead in bioenergy installed capacity, with 318 GW, followed by the European Union with 107 GW and Latin America and the Caribbean with 94 GW. In addition, biomass can be used for co-firing coal power plants as an intermediate measure to reduce CO2 emissions.
Bioenergy-based electricity can play a particularly important role when: i) its generation costs are lower than other sources (i.e. where biomass feedstock costs are low or where heat can be used in co-generation systems); ii) it helps to balance output over time on electricity grids with high shares of variable wind and solar power; and iii) it is possible to use BECCS.
Total installed costs for bioenergy vary significantly. Projects using bagasse and rice husks tend to have lower installed costs than those using landfill gas, wood waste, other vegetal and agricultural waste and renewable municipal waste (IRENA, 2019c). Overall, however, bioelectricity’s relatively high costs and limited options for lowering them are the main constraining factors to faster deployment.
Key barriers to deployment
Despite strong drivers for the uptake of bioenergy, multiple barriers stand in the path of its further development globally. These vary depending on specific markets and renewable energy technologies. They include challenges such as the high cost of many bioenergy options and the lack of access to finance. There also are policy barriers, including the lack of specific regulations, and cultural and awareness barriers. In particular, the deployment of biofuels is highly affected by global trends in oil prices. The recent abrupt decline in oil prices during the COVID-19 crisis, for example, is threatening the development and use of biofuels. If the current low fossil fuel prices are maintained, biofuels will struggle to compete with conventional fuels.
The key barriers to transitioning from traditional to modern uses of biomass are as follows:
One major barrier is the higher cost of the improved equipment and fuels which replace what is essentially a “free” resource of wood fuels and other residues (although their collection requires considerable time and effort). This cost barrier is reinforced by the lack of access to capital to finance the purchase of clean equipment and fuels, or to provide for investment and working capital for fuel or equipment production systems. When loans are available, they are generally only for small amounts, which disincentivises potential lenders from accepting the administrative costs to offer the financial products in the first place. Micro-finance can play an important role here.
Many proposed cookstove solutions do not have the technical characteristics to meet appropriate efficiency and environmental performance standards and also do not provide culturally acceptable solutions which reflect the needs of consumers, particularly in rural areas. Improved bioenergy cookstoves still have low efficiencies and often fail to meet health guidelines, unless associated with improved fuels (such as briquettes and pellets, or ethanol-based fuels).
“Clean” cooking fuels, such as biomass briquettes, and suitable cooking stoves have immature distribution channels, which can lead to supply concerns for clean cooking fuels or to higher prices. Distribution to remote rural areas is especially challenging. Fuel supply chains are often based on unsustainable patterns of biomass production which negatively affect forest cover. Programmes for improved biomass solutions often do not address the needs for sustainable fuel supply and for user solutions
The lack of a coherent strategic approach to clean cooking has been a major impediment to progress in many countries. The issues relating to clean cooking cut across many government actors, including ministries responsible for energy, social, financial, environmental and forestry issues, who may not give this issue priority, making coordination difficult.
There are a number of barriers for modern bioenergy in the developed context. Some of these are listed as follows:
When low-cost feedstocks are available as by-products from agricultural or forestry processes, bioenergy electricity can be competitive with fossil fuel solutions. In 2018, when about 5.7 GW of new bioenergy electricity projects were commissioned, the global weighted average LCOE of the new power plants was USD 0.062/kWh. This is a decrease of 14% from 2017. However, bioenergy power generation costs are often higher than those of other renewable generation technologies such as wind and solar PV, where costs have fallen dramatically in recent years.
Investors often consider the risks associated with bioenergy projects to be higher than for other renewable technologies. This is because of increased risks associated with ensuring a reliable fuel supply and concerns about technology complexity and meeting sustainability criteria. In contrast to wind and solar projects, the risk profile of nearly every project is different, given different feedstock and technology combinations. Financing for large-scale demonstration for new technologies such as advanced biofuels is particularly challenging, especially since bioenergy systems need to be tested at large and therefore costly scales, unlike technologies based on modular units like wind and solar PV.
The deployment of bioenergy depends on a strong and supportive policy and regulatory regime that provides for investor certainty over the income streams that projects will receive and also clearly establishes the regulatory requirements that projects must satisfy. For example, regulations must specify levels of emissions to air and water that are permitted and what other sustainability criteria must be achieved. Policy certainty is particularly important for bioenergy projects, where project lead times tend to be long, given the needs to plan technical aspects of projects, to negotiate other energy off-take agreements (sometimes for more than one energy product – e.g. heat and power), and to build up the necessary supply chain.
Addressing these barriers will be fundamental for a successful energy transition in many countries and regions. Governments have important roles to play in providing measures to support deployment and technological innovation. Those measures can include grants, feedin tariffs and certificate schemes, as well as clear policy and regulatory frameworks, such as ambitious targets to drive markets and regulations for waste and blending. Policies and regulations could also help in ensuring that the appropriate infrastructure is in place for the greater uptake of bioenergy. For example, the availability of district heating systems is a powerful enabler for bioenergy heat supply in urban areas. Other enabling policy interventions include improving awareness of the benefits associated with bioenergy by providing clear and reliable information to consumers and potential investors; creating a level playing field through the removal of subsidies for fossil fuels; and introducing carbon pricing or other taxes, levies and duties to put a price on the environmental impacts of fossil fuel energy use.
“Ultimately, the success of the energy transition in mitigating the climate crisis will depend on the policies adopted, the speed of their implementation and the level of resources committed. In our interconnected world, international cooperation and solidarity are not just desirable, they are vital for addressing climate change, economic inequality and social injustice.”
Policies to support biomass use in energy
A wide range of policies and regulatory instruments can reduce barriers to bioenergy development and help create a positive enabling environment, ensuring that its development optimises carbon savings and avoids negative environmental, social or economic impacts.
Direct policies, which are normally used to support the development and deployment of technologies and are typically classified as push or pull, and as fiscal and financial.
Integrating policies, which promote planning and coordination, such as R&D policies and infrastructure policies.
Enabling policies, which focus on reforming the broader institutional architecture to enable systemic effects between the energy sector and the broader economy and which link four crucial national policies: industrial policy, labour market and social protection policy, education and skills policy, and financial policy
G20 member states have a strong economic and political interdependence, with a shared interest in creating a sustainable and stable global environment. G20 countries together can foster the development, deployment and spread of bioenergy technologies. Ultimately, the success of the energy transition in mitigating the climate crisis will depend on the policies adopted, the speed of their implementation and the level of resources committed. In our interconnected world, international cooperation and solidarity are not just desirable, they are vital for addressing climate change, economic inequality and social injustice.
The full report by IRENA can be downloaded by clicking here
According to the World Energy Outlook 2019, almost 1 billion people in the world today do not have access to reliable electricity. As the world continues to lift people out of poverty and bring access to electricity to deep corners of the world, the global energy requirements, including for electricity and for industry, are going to go up.
At the same time, it is widely accepted that we need to find different energy sources. Carbon intensive sources like fuelwood, coal and natural gas need to be phased out as we build a climate-resilient world. Several authorities have come onboard the need for low-carbon energy generation. (And even if you don’t believe in the CO2-induced theory of climate change, the fact remains that using fuelwood, coal and gas-based energy generation has terrible health consequences.)
Discussing low-carbon energy invariably leads to a big debate: Renewables vs nuclear.According to you, which form of low-carbon should the world depend on?Renewable energyNuclear energyI’ll answer this after reading the article (okay! There’s another poll at the end for you!)VoteView ResultsCrowdsignal.comAdvertisementsabout:blankREPORT THIS AD
Option 1: Renewable energy (solar and wind)
When we talk of renewables, most people stress on solar and wind energy.
Solar and wind have become increasingly popular in the last two decades. They are being promoted as the energy sources of the future because they do not emit GHGs during electricity production. Even their emissions during manufacturing and decommissioning pale compared to other forms of energy. Energy generation from renewables is expected to grow by 300% by 2040 due to their popularity and advancements in battery storage technology.
Solar and wind farms are also easier and faster to build compared to most other sources of energy.
They are flexible and can ramp energy production up or down at a moment’s notice, depending on the demand. This is important in today’s energy use scenario. For example, if a popular TV show runs from 9:00 – 9:30 PM, we will see a spike in energy demands at 9 PM followed by a dip in demands at 9:30 PM. We also have situations of negative demand, when people generate more electricity (from their rooftop solar) than they use and supply the surplus to the grid. In such cases, other sources of energy would need to ramp down. Such situations place undue stress on the grids, which renewables can easily handle.
The biggest advantage from solar and wind is their independence from the grid. Set up panels or windmills on your rooftop and you can produce your own electricity without depending on the grid! This ability makes these options attractive in unelectrified areas and areas very far from electricity generation plants.Advertisementshttps://c0.pubmine.com/sf/0.0.3/html/safeframe.htmlREPORT THIS AD
Option 2: Nuclear energy
Nuclear energy is not new; nuclear power plants have existed since the 1950s. Nuclear power plants also do not emit GHGs during electricity production and are a good low-carbon energy source. Several features of nuclear energy make it a superb source of energy for the future.
The most impressive by far is its power density: nuclear energy produces more power per unit volume than any other form of electricity source we know. This also makes them space-efficient. Even their waste products can be contained within a small space, compared to the waste generated by decommissioned solar and wind infrastructure.
They are stable and reliable. If the nuclear power plant works properly, we can be guaranteed a given amount of electricity at all times. This is key in industrial areas and urban centers where the demand for energy rarely fluctuates. Often, these areas are also well-connected to the grid and require large amounts of power, making nuclear a more attractive option than the intermittent, power-thin renewables.
Contrary to popular belief, it is safe. Nuclear disasters have occurred largely due to mismanagement and primitive technology, both of which are avoidable in today’s world. Nuclear wastes also need not be dangerous if proper precautions are taken and protocols are diligently followed.
However, solar and wind are far from ideal…
Solar and wind have their fair share of criticisms.
First, they are intermittent: we cannot get reliable electricity throughout the day, month or year from either of these sources. This means we need a back-up—either through battery storage (who’s capacity is still low) or through coal/natural gas plants (kind of beats the purpose)—or we need a combination of different renewable energy sources that can feed support each other. The need for backup, along with the new grid infrastructure we need to interconnect different renewable sources, has increased the cost of electricity for consumers even though the cost of energy has gone down.
Second, they have low power densities; they produce low energy per unit volume compared to fossil fuels and nuclear. This means that if we tried to power the world entirely by a combination of different renewable energy sources, we would need A LOT space. For example, if the entire world was to be powered by solar, we would need a land area the size of South Africa. Not at all efficient.
Third, the infrastructure we create for wind and solar has a lifespan of 25-30 years. What happens at the end of their lifespan? Disposing solar panels and windmills are a huge pain, requiring massive infrastructure to recycle their components. If we didn’t recycle them, we would dump them in landfills and cause an environmental disaster.
When we try to scale solar and wind energy generation through parks or farms, this technology incurs a significant ecological cost. Solar farms displace animals from their homes and create a heat island that is unconducive to most lifeforms. Similarly, wind farms are notorious for their interference with the flight paths of large birds and bats.
Nuclear energy also has problems…
Nuclear energy’s biggest detractor is its construction. It takes a long time and a lot of money to construct a nuclear power plant. This isn’t ideal because we need to cheaply and quickly produce low-carbon forms of electricity to meet the rising demands around the world. Construction of nuclear power plants is also very carbon-intensive.
Nuclear isn’t traditionally flexible, and modern designs offer limited flexibility, which isn’t ideal in places with highly variable energy demands.
Introducing nuclear energy (and wastes) in countries that do not yet have access to this technology creates the risk for weaponization. While the chances of an all-out nuclear war continue to be low, the risk cannot be discounted.
Should we be choosing one or the other?
For the longest time, I felt that this is a binary option. That is how the debate has been structured on the global stage. But a closer look at the advantages and disadvantages of renewables and nuclear paint a different picture. See for yourself…
This table compares the two forms of energy against several parameters of a future energy grid.
Clearly, nuclear and solar/wind are complimentary: where one falls short, the other can support.Advertisementsabout:blankREPORT THIS AD
Conclusion: Should we rely on only one form of energy?
Given different needs in different areas of life, it is unwise to depend on any one form of energy. For example, solar/wind is cheaper and faster to electrify rural areas, where the need for electricity remains low and it is expensive to connect them to the grid. Nuclear makes sense in cities and industrial complexes that need reliable, stable and cheap electricity all the time.
Let me ask you the question again:According to you, which form of low-carbon should the world depend on?Renewable energyNuclear energyA combination of bothVoteView ResultsCrowdsignal.com
Bonus: Are hydroelectricity, bioenergy, geothermal and tidal the best of both worlds?
Many people mention these sources under renewables. In fact, hydroelectric power plants form the largest proportion of the renewable energy mix. However, they behave differently compared to solar and wind and have many features of nuclear energy.
Hydroelectricity, bioenergy, geothermal and tidal—can counter many shortcomings of solar and wind, like power density and intermittency. Unlike nuclear, they are relatively cheaper and faster to build.
But they come with their own problems. They are all highly location-specific, take time and resources to construct, and occupy a lot of space causing huge environmental and social damage.
These forms of energy make sense depending on the location. Hydro, geothermal, tidal and bioenergy can generate all the energy a region requires, or can easily work with solar and wind to meet energy needs. They can be a reliable substitute to nuclear energy in controversial places where energy requirements are high and consistent.
The future of energy in a low-carbon world, according to me, does not have to renewable OR nuclear. We need a bit of both (the relative proportions, of course, are debatable). Their features are complimentary and the next generation energy grid should evolve to accommodate both forms of energy.
At a time, when important issues are being raised and out of the ordinary tensions are taking place concerning gas fields, Algeria faces geostrategic gas tensions in the Mediterranean. It is, in particular, the tensions between Greece and Turkey, challenging it where its primary gas market is, in Europe, and whose hydrocarbons with derivatives provide 98% of foreign exchange revenues in 2019, where the price of gas disposal has fallen by more than 75% in 10 years and providing 33% of its SONATRACH’s revenues. Here is an analysis of options for this unprecedented east Mediterranean situation as seen from Algeria.
Between 2018/2019, according to the IEA we have the following distribution 33.1% of oil, 27.0% coal, 24.2% natural gas, 4.3% nuclear and 11.5% renewable energy (hydropower 6.5%, wind 2.2%, biomass and geothermal 1.0%, solar 1.1%, agrofuels 0.7%).
Natural gas is derived from fossil fuels and is made up of decomposing organic matter that has been released into the soil for millions of years and is routed through pipes. We have liquefied natural gas as far as it is a natural gas that has been changed to a liquid state so that it can be transported and stored more easily. Because natural gas deposits are often far removed from many consumers of this energy, transporting it in a gaseous state is risky and expensive.
Also and by cooling it, it is possible to transform it into liquid natural gas, There are two main markets on which the world’s natural gas is traded. The most important is the NYMEX or New York Mercantile Exchange located in the United States, and the second, the NBP or National Balancing Point of the International Petroleum Exchange located in London. There are other smaller markets such as the FTT in the Netherlands or The Zeebrugge in Belgium. Between 2018/2019, before the coronavirus outbreak, according to Cedigaz, demand increased, strengthening its place in the energy mix. In 2018, international LNG represented a provisionally estimated volume of 311 Mt, according to Cedigaz, up 8.5% from 2017. LNG now accounts for more than a third of gas trade, with growth in LNG imports concentrated in Northeast Asia (China and South Korea), where gas plays an increased role in electricity generation and heating. China contributes the most to the growth in global LNG demand, with more than 60% of the total increase in trade.
Proven world reserves on a total of 197.394 billion cubic meters of gas (data from 2018/2019) we have in descending order: Russia 47,800 billion cubic meters, Iran 33,500, Qatar 24,300, USA 8,714, Saudi Arabia 8,602, Turkmenistan 6061, Venezuela 5702, Nigeria 5,284, and China 5,194 and for Algeria between 2500 and 3000 according to the statement of the current Minister of Energy before his appointment and the communiqué of the Council of Ministers of 2014, the data of 4500 being those of BP of the years 2000. The top 10 countries producing natural gas in descending order are. Russia alone accounts for 20% of world natural gas production. It is also the largest exporter, second with the shale gas revolution becoming an exporter in Europe, the United States of America, followed by Canada (third place) and Qatar fourth, with Iran downgraded following US sanctions, followed by Norway, China, Saudi Arabia, and Algeria, which ranked ninth. These data should be interpreted with caution because thousands of deposits can be discovered, but not profitable according to financial standards depending on operating costs and the evolution of the international price itself depending on the demand and competition of substitutable energies As for some experts who speak of an OPEC gas market in the image of OPEC oil, it should be stressed that the gas market is not in this month of August 2020, a global market but a market segmented by geographical areas while the oil market is homogeneous, due to the preponderance of pipelines, being impossible to meet the same criteria, the solution being cooperation within the FPEG which consists of 11 member countries (5 in Africa (Algeria , Egypt, Equatorial Guinea, Libya, Nigeria) – 2 in the Middle East (Iran, Qatar); – 3 in South America (Bolivia, Trinidad and Tobago, Venezuela) and Russia, 9 non-member countries with observer status: Angola, Azerbaijan, the United Arab Emirates, Iraq, Kazakhstan, Malaysia, Norway, Oman and Peru, the United States, one of the world’s leading gas producers, are not part of the FPEG.. To one day reach a gas market that meets oil market standards (daily listing), the share of LNG would have to increase from 30% to more than 80%. Until then, because investments are hefty, everything will depend on the evolution between 2020/2030/2040, on-demand for LNG which will depend on the new global energy consumption model that is moving towards the digital and energy transition with an increase in the share of renewables, energy efficiency and between 2030/2040 hydrogen which risks degrading a large part of the transition energy.
What about the current tensions in the eastern Mediterranean regarding the energy sector which is not immune to OPEC’s action, but indirectly affecting the price of energy and the market share of Algeria towards Europe its principal customer, recalling that there is a gas organisation independent of that of OPEC.
A friend, the polytechnician Jean Pierre Hauet of KP Intelligence, France rightly notes that the energy scene comes alive in the Mediterranean with at least two significant fields of manoeuvring which it is interesting to try to understand the ins and outs that explain the current tensions, especially in the eastern Mediterranean. The first theatre is that of renewable energy (wind, concentrated solar, photovoltaic) which has been characterised by the launch of major initiatives based on the idea that technical progress in direct current transmission lines would allow taking advantage of the complementarity between the electricity needs of the countries of the north and the availability of space and sun of the countries of the South. At the time, we were talking about 400 million euros of investments and the satisfaction of 15% of Europe’s electricity needs. Today, the Desertec project is instead at half-mast, due in particular to the withdrawal of major industrial players, Siemens and Bosch, and the consummate disagreement between the Desertec Foundation and its industrial arm the Desertec Industrial Initiative (Dii). Dii continues its ambitions to integrate European, North African and Middle Eastern networks, while the Desertec Foundation now seems to favour bilateral initiatives in Cameroon, Senegal and Saudi Arabia. The second theatre of operations is recent: it relates to the discovery from 2009 of deep offshore gas resources in the eastern Mediterranean, which explains the current tensions. Large companies that used to operate other more accessible, profitable fields or near facilities nearby, on land, are now turning to the eastern Mediterranean, off Egypt, Israel, Lebanon, Cyprus and Turkey, all countries that do not necessarily have good neighbourly relations. Because several gas deposits have been discovered off the coast of Egypt, Israel, Lebanon or Cyprus, at the heart of the so-called Levantine basin, it is estimated by the US Geological Survey at 3,452 billion cubic meters (m3). “For the producing or future producing coastal states, this gas resource offers the opportunity to achieve energy independence and a way to bail out their economy through potential exports” according to the Mediterranean Foundation for Strategic Studies in a well-documented report. That is why Turkey is conducting research. Even if Greece and part of the international community accuse it of having entered the Greek maritime space, international law is unclear in this situation which does not delineate borders and geographical boundaries. Gas resources can be found on or offshore limits of a country or in either transboundary or not clearly defined boundaries reservoirs, and the Turkish initiative could be the beginning of a long series of tensions that could transform regional balances. Because geological formations do not know the political borders, oil and gas companies have explored the marine subsea soils of neighbouring countries. This was followed by the uncovering of the Leviathan field (2010) also off the coast of Israel, Zohr (2015) in Egyptian waters, then Aphrodite (2012), Calypso (2018) and Glaucus (2019) around Cyprus. Exploration of Lebanese and Greek waters is not advanced. Athens has already allocated parcels to ExxonMobil, Spain’s Repsol or Total. On February 19, 2018, a historic $15 billion contract between Egypt and Israel provided for the supply of natural gas from the Tamar and Leviathan offshore reservoirs to Egypt, according to a report by the Mediterranean Foundation for Strategic Studies (FMEN). To ease tensions, although the countries of the Mediterranean all face the problem of energy security, it is above all a question of strengthening cooperation especially in the energy field, which can represent a vital link between the north and the South of the Mediterranean.
What is the case for Algeria where according to SONATRACH’s balance sheet in 2019, it makes up about 33% of its revenues, to which must be deducted the costs and the share of partners dependent on natural gas in order to have the net profit? The structure between natural gas exports through the two major Medgaz pipelines via Spain capacity, of 8 billion cubic meters gas and Transmed via Italy between 35/40 billion cubic meters of gas, currently under capacity, represents about 75% of the total towards its primary market Europe. LNG about 25% that provides it with more flexibility, Algeria is strongly competed against between 2020/2025 by the American, Russian, Qatari LNG. The latter has installed large capacity two to three times that of Algeria and for the gas piped by Russia the North Stream (55 billion cubic meters of capacity and the South Stream (capacity of 63 billion cubic meters gas), not forgetting as previously highlighted the discoveries in the Mediterranean. Nigeria and Mozambique are important producers with the latter country having the largest reserves in East African countries, with nearly 5 trillion cubic meters, on two offshore blocks in the province of Cabo Delgado in the far north of the country. By 2025/2030, Mozambique is likely to become the fourth-largest gas exporter in the world behind the USA, Qatar and Australia. In order to export to Asia, it will have to bypass the entire cornice of Africa posing the problem of profitability, in addition to the operating costs is added an exorbitant transport cost, unable to compete with Russia with the Siberian China gas pipeline, called “Power of Siberia”, more than 2000 km at the Chinese border, transporting 38 billion cubic meters of Russian gas to China each year by 2024/2025, a contract, estimated at more than 400 billion dollars over 30 years, signed by Gazprom and the Chinese giant CNPC, signed by Gazprom and the Chinese giant CNPC. Not to mention Iran and Qatar close to Asia. In the end, everything will depend for Algeria to enter the global market of cost requiring new strategic management of Sonatrach whose operating account for several decades depends fundamentally on external factors beyond its internal management, the international vector price, which led the president of the republic to demand an audit of this company. As for the world price between 2007 and September 2020, it fell by more than 75%, much more than for the oil. It has gone from 15/16 dollars for the GLN to 4/5 dollars and $9/10 for natural gas (GN). It has fluctuated between 2019/2020 between $1.7 and $2.5 per MBTU, in the open market. And recently between January 2020 and September 2020, we will have to take into account the dollar/euro rating which has depreciated by more than 11%, due to the uncertainties of the US economy and especially the swelling of the budget deficit bringing it back to the constant price thus having to draw the currency balance
In short, energy is at the heart of the sovereignty of states and their security policies. The world is moving during 2020 through 2030, inevitably towards the digital and energy transition with a new model of energy consumption and knowledge imposing on our leaders a cultural renewal far from the material mentality of the past that cannot lead the country with expensive projects, uncertain profitability to the impasse. Economic dynamics will alter global power relations and affect political recompositions within and regional spaces, hence the importance of understanding geostrategic energy issues and appropriate solutions, far from unrealistic discourses.
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, GDP‘s 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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