Report Predicts Fall of Oil to Alternative Transport Fuels as OPEC Argues Over Production Freeze
OPEC is facing many threats right now. The first, and largest, of these problems is over-saturation of the market with the return of Iran’s oil sales as well as expanding oil production across the globe. Although Iran is part of OPEC, it has not been cooperating with efforts to establish an oil production freeze that would raise oil prices again. Oil prices experienced a rise one Monday after Russia announced it would join in the proposed production freeze; however, based on the comments of some OPEC leaders, the production cap may not actually happen, with Saudi Arabian Energy Minister Khalid al-Falih saying at the annual World Energy Conference in Istanbul, “It is a very gentle hand on the wheel—we are not doing anything dramatic.”
The common effect that we see of this trouble is the prolonging of low gas prices.
Adding onto the OPEC arguing about the production freeze, a report from the conference seriously called into doubt OPEC’s ability to control prices and production. Specifically, the report points to rising exports of liquefied natural gas from the US and Australia, as well as pointing out that costs for non-OPEC oil-producing countries to make oil are such that non-OPEC countries could counterbalance OPEC attempts to drive the price up.
Beyond doubting OPEC’s power in the industry, the report also casts doubt on the continued growth of oil in general, predicting a decline in demand in the next 20-30 years or so, saying, “Growth is tempered by increased competition from alternative transport fuels, which result in a move away from gasoline and diesel in light and heavy-duty transport.” It went on to prodect that production would peak at around 2030, after which output would swiftly drop.
If true, this trend would fly directly in the face of an OPEC prediction that electric vehicle sales would remain a small, niche group.
News Source: International Business Times