Since its establishment in 1961, the Organization of the Petroleum Exporting Countries has faced many challenges. These challenges ranged from the abduction of one of its ministers, wars in member countries, and international sanctions targeting oil exports to threats and international political pressure to force the organization to change its production policy and lower oil prices.
Oil and its derivatives are of great importance as they help drive the industries used in the transport and energy sectors.
Let’s check the Arab News article on this issue.
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Oil represents 65% of the total global trade, which amounts to $3.65 trillion every year. It is a key factor behind the stability of the global economy, which is why OPEC is seeking to unify oil-related policies among its members to achieve stability in markets and respect the interests of consumers and investors.
Despite several challenges, OPEC is also working to achieve its goals and secure fair and continuous revenues for its members. Perhaps what best proves the sincerity of its efforts is the announcement of the strategic partnership with non-OPEC oil producers in April 2020. This was a great achievement in which Saudi Arabia played a pivotal role to help restore stability in the global markets.
Oil prices improved and increased to $70 per barrel, while Saudi Arabia adopted additional production cuts to preserve the effectiveness of the historical agreement that was concluded in January of 2017.
Oil constitutes a large portion of the global energy mix, which reached 37 percent of global energy needs in 1990. OPEC currently expects an increase in the demand for oil in light of the growing population.
It also expects the demand for oil to stabilize in 2040, while the projections of the International Energy Agency say that the demand for oil will decrease that same year.
Despite the expected steady increase, the share of oil in the energy mix will decrease to around 27 percent in 2035.
This means that OPEC will face major new challenges in the future, which include technological advancements aimed at developing clean energy and global efforts to reduce the emission of harmful gases, such as carbon dioxide and sulfur oxides, and to address global warming and abide by international environmental legislations.
Some European countries announced that they have stopped manufacturing cars that use gasoline and diesel and are instead manufacturing and promoting electric and hybrid cars. This will negatively impact the operations of global refineries and will definitely lead to a reduction in the consumption rates of oil and its derivatives.
Growing interest in clean energy – namely solar power, wind power, blue and green hydrogen, hydroelectric power and electric batteries – will come at the expense of oil consumption in the coming years.
We can see this through the growing investments of some nations in renewable energy, including OPEC members such as Saudi Arabia, the UAE and Kuwait, which are investing in renewable energy projects to raise their need for clean energy by 30 % by 2030.
It is known that the Gulf countries, led by Saudi Arabia, have a leading position among the members of OPEC as they make up 50 percent of the organization’s total production, have huge oil reserves that represent around 40 percent of OPEC’s reserves and have a total refining capacity of 5.5 million barrels per day.
Gulf refineries need to unify their policies and production plans so they can operate as one refinery.
What will these Gulf countries do to promote their pivotal and effective role in the future of oil and alternative clean energy in light of the likely future challenges?
There is no doubt that the decline in oil prices and oil production will negatively affect the financial resources of the oil-producing countries, especially those in the Gulf, which rely on oil as a main source of yearly revenue.
That is why, amid the changes taking place in the global energy markets, these countries should rearrange their priorities and review their strategic directions for the medium and long term.
They should diversify their revenue sources and increase participation in successful international investments. Secondly, they should focus on unifying scientific and technological research centers and setting up new research plans that take into account the future requirements.
It would also be helpful to connect the Gulf countries with a network of oil, gas and oil derivatives, with the possibility of connecting also to Asia and Africa.
Gulf refineries also need to unify their policies and production plans so they can operate as one refinery.
There is a need to increase cooperation and coordination in the fields of global marketing, maritime transport and pricing equations for Asia and Africa.
Encouraging advanced industries related to the development of renewable energy, carbon neutrality and climate protection will also help in the long term.
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Check the story about the benefits of a competitive GCC in the post-oil era here.
