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Sunday, December 4, 2016

The end of the oil era is postponed


US Department of energy made a lot of noise by posting very positive for Russia and other oil-producing countries forecast the price of oil by 2040. In the best case it will be $ 250 per barrel in the worst – 75 that is already one and a half times above current levels. But the important thing is that the Americans dispel the myth that the era of traditional hydrocarbons ends.

The U.S. Department of energy has prepared three scenarios of development of events in the oil – optimistic, realistic and negative.

Oil at $ 250

“For at least the next 25 years oil will remain the main energy source in the world. By 2040 oil production will provide 30% of world’s energy”

The most optimistic was 23 years later the world is waiting for oil at $ 250 per barrel (hereinafter in prices of 2013). However, oil producers is the best fit and realistic (base) scenario in which a barrel of oil will cost $ 140.

The price will jump to $ 250 if multiple factors are present. The main is that the countries outside the OECD must show the average annual GDP growth not less than 4.5%. High economic activity in these countries will provide a higher energy consumption. On the other hand, the higher cost of liquid fuel will encourage more consumers to use other sources of energy, including renewable (wind, solar, biofuels). In the baseline scenario GDP of non-OECD is growing at 4.2% per year.

With regard to OECD countries, their economic growth in the optimistic forecast does not differ from the realistic (reference) scenario, and the General level of consumption of oil in both cases are similar. Higher oil prices combined with the same level of economic activity, in 2016, will force the OECD to improve energy efficiency and switch to less expensive fuels where possible. Therefore, by 2040, the OECD will consume 44.1 million barrels per day in the case of high oil prices compared to 46,1 million in realistic scenarios.

As for the proposal, in a scenario of high prices of oil extraction in OPEC countries is lower than in the baseline scenario. Their market share will decrease to 34% in 2040.

Oil at $ 140

In realistic scenarios, oil prices will rise to $ 140 per barrel. It will be quite possible at moderate costs in exploration and development of oil fields. For this expenditure should grow by 1.6% per year over the remaining 23 years.

The world’s largest exporters and consumers of oil, and countries, which are its greatest proven superyacht scenario assumes that OPEC producers can increase their share up to 39-43% of the world oil market. Oil consumption in OECD countries will increase by not much – from 45.5 million barrels a day in 2012 to 46.1 million barrels in 2040. Whereas countries that are not members of the OECD, will provide the main demand for fuel due to their growing economies: from 44.8 to 74.8 million barrels per day.

Oil at $ 76

Negative scenario assumes crude oil at $ 76 per barrel. He realized, if countries outside the OECD, will show slower growth of their economies – annual GDP growth of 3.9% compared with 4.2% in the baseline scenario and 4.5% in optimistic scenario. The decline in economic activity in these countries will not create the preconditions for high oil prices, however, demand for oil they will provide almost the same as in the baseline scenario.

With regard to OECD countries, they show the same economic growth as in the baseline scenario. At the same time to consume the black gold will become more active: 48.4 million instead of 46,1 million barrels per day in the baseline scenario. The bottom line is that consumers will be well to consume oil, because the price low, and they will not have to actively switch to other forms of energy.

But OPEC in the case of low oil prices will increase oil production and increase market share by 2040 to 48%. The extraction of oil in countries outside OPEC will be lower. They will be less economically advantageous to build a more expensive trade black gold with low prices.

In fact, trends in this scenario are already being implemented in the last couple of years, only in a more stressful version. Now the price of a barrel is trading around $ 45, while more recently, oil prices fell and $ 30.

Too bold predictions

Forecasts on oil for such a long period today is questionable. “At the moment the growth of oil above $ 140 a barrel looks unrealistic not only because of the relatively high level, but because of too long-term forecast horizon. By 2040, the situation on the commodity markets can change dramatically, and that is why we are now seeing a sharp change of course in Saudi Arabia at reducing the economy’s dependence on oil,” says a senior analyst at GK Forex Club Alena Afanasyeva.

In addition, the demand for oil amid the growth of renewable energy may fall in the coming years, she believes.

“At the moment of Brent crude growth potential is limited by a mark of 50 dollars per barrel, and it is subject to incessant conflicts in Nigeria, Libya, Venezuela and Kuwait. The only interruption in production of some countries at the moment can offset the negative effects from the slowdown in the Chinese economy and increased production volumes in the OPEC countries and Russia”, – said Afanasiev.

The next chance for growth in Brent, in her opinion, can only appear closer to the June OPEC meeting, which is still not eliminated adjustments in the rhetoric of countries cartels.

“The new Minister of oil of Saudi Arabia remains a “dark horse”, so his first clear comments about the country’s position in the commodities market can cause a sharp fluctuation with a probability of movement to around 55 dollars per barrel at his willingness to the reduction of production volumes”, – said the expert. However, if the opposite applies, we can expect a new collapse of oil prices.

Oil, gas and coal, there is no substitute and a quarter of a century

However, with forecasts of oil prices is not sure itself US Department of energy. The authors of the report warn that expectations for oil prices in 2040 is one of the major uncertainties of the forecast research.

But other Americans are more confident, as well, and Russian specialists. They believes that the era of traditional hydrocarbons is far from complete. Renewable energy sources (RES) and at least will show the strongest growth, but still not be able to oust the traditional. Therefore, all the threat of some market participants about the mass transition to renewable energy sources the planet can safely assume that the usual horror stories to extract more money for government subsidies.

For example, just earlier this year, the head of Sberbank German Gref said that the era of hydrocarbons is nearing completion and she has only 10 years, and the future of electric vehicles and renewable energy. Last year was one of the most successful for RES in terms of cost: investments in renewable energy two times higher than investments in fossil energy sources, reported Bloomberg. Germany promised to do by 2050 to fully switch to renewable sources of energy.

However, the US Department of energy parries: for at least the next 25 years oil will remain the main energy source in the world. By 2040, oil will ensure the production of 30% of the world’s energy, its share will decline only 3% from the current levels. Natural gas in General will continue to grow at the highest rate among the hydrocarbons. “By 2030, gas will move from second to third place on this indicator coal,” the authors of the study. Coal by 2040 will account for 22% and natural gas – 26% of power generation in the world.

Renewable energy in the coming quarter century, will show the fastest growth rates. But they still will not be enough to push oil, gas or coal. Although the share of renewable energies by 2040 will be quite significant – 16%. Nuclear energy will remain important, but, according to American researchers, will be growing slowly, its share will increase from the current 4% to 6% by 2040.

Exactly the same conclusions were reached earlier and the energy research Institute of the Russian Academy of Sciences (ERI RAS) and the Analytical center for the Government of the Russian Federation (ATS) in their study “energy Outlook of the world and Russia until 2040”.

In the coming quarter century is not expected radical changes in the global fuel basket – the world is still not ready to reduce its dependence on fossil fuels, according to Russian researched. “Hydrocarbons will retain absolute dominance in the energy mix – their share in 2040 will amount to 51.4%, which practically corresponds to 53.6 per cent in 2010”, – the authors of the report.

But in absolute terms, will lead the gas. The blue fuel will be the most popular type of fuel until 2040.

Meanwhile, Russia will also retain its leading position in the world market of hydrocarbons. Our country and 25 years later remains not only the world’s largest exporter of oil and gas, but also the largest manufacturer.

In Russia will mark a significant growth of gas production, renewable energy sources and nuclear energy while reducing the share of oil and maintaining the share of coal. Thus, according to the Russian experts, gas production in Russia will exceed 900 billion cubic meters per year, and compared to the USA only. Oil production in Russia stabiliziruemost by 2030 close to the current level of 500 million tons per year – and will be comparable to the production of Saudi Arabia and the United States. For comparison: at the end of 2015, Russia produced 635 billion cubic meters of gas and 534 billion tons of oil.

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