Not intimidated by slowdown in oil demand



Othman Al-Khuwaiter

Published — Sunday 30 December 2012

Last update 30 December 2012 3:59 am

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No one disagrees that the gas and liquid derivatives of the oil energy sources are the best choice among all other energy sources in the present day. They will remain the main source of energy for the foreseeable future because of the growing infrastructural needs costing trillions of dollars. These traditional energy sources also have their logistic advantages, and their calorific values. Therfeore, it is impossible to dispense with these sources economically.
The only source that perhaps highlights a competitor for oil sources in terms of cost and sustainability is solar energy. But despite the likelihood of this happening, it is certain that the use of solar energy as a source of electric power will be limited for many years and will just be a suppplement of the oil energy and can help plug the gap which is expected to occur as a result of the gradual natural depletion of oil resources.
At a time when we are worried about the depletion of cheap conventional oil in absence of any sustainable and appropriate alternative energy sources, we find that there are those who warn us of the possibility of slowing global demand for energy. They seem to be telling us to do what we can to prevent the rise of the price of a barrel of oil to record levels, claiming that if we do not, the consumer will replace the use of oil with other sources. They did not tell us, however, toward where consumers turn.
We know that there is no new source of energy equivalent to oil resources, both in terms of importance and relevance to human life. We confirm, beyond a reasonable doubt, that the rise of oil prices to any level, no matter how high it is, will not be a reason to dispense with it. This is because of the simple reason that there is no alternative which has specifications enjoyed by oil.
Some argue that the higher prices could lead to a contraction in economic growth, which in turn may lead to a reduction in the amount of energy demand. This is normal but the expected decline will be a few percent.
To set an example of what could happen, the sum of global consumption now is equivalent to about 90 million barrels of oil per day, and production is close to it. If we had a lack of demand as a result of economic crises, it would likely lead to not more than a 5 percent decline, or the equivalent of four-and-a-half million barrels of oil.
Even if the shortfall reached twice this amount, it will not mean at all dispensing of oil because the world still needs 80 million barrels.
Usually the focus is on the possibility of lower global demand in special cases which may be for economic reasons or otherwise. We forget that the nature of the production, when it reaches the highest level, the journey of decline will begin if we do not explore new fields. It has been proven through the past three decades that the chances of new oil reservoirs of cheap traditional type are rare.
I had written an article in the “Economist” newspaper on May 10, 2009 under the title “Fear is not to dispense the oil but form the reserves to dry up.” I still hold that position. What is more likely to happen is a lack of oil supplies and failure to keep up with global demand, which inevitably will raise prices to record levels at the time which may not be far off. It is not unlikely that this approach will lead to cause serious destabilization of the global economy, regardless of what may happen after that symbolic lack of demand for oil as explained above.
All of these variables will be beyond human control because this is governed by supply and demand. I say this as I am aware there are significant activities in the United States to produce a few million of additional high-cost barrels of oil from the shale rocks and modest amounts of oil of bad specifications from the Canadian sand.
There are those who would like to escape from oil as an energy source, because most sources are located outside their control. However, this is hard for them to be able to do due to the total absence of appropriate alternatives.
We emphasize again that the most serious issue today, which is threatening the economic and social future of the world, is the depletion of oil before finding alternatives that could replace it, even gradually. It may be absent from the minds of many of the officials and decision-makers and even specialists in economics that we are depleting the oil wealth in a crazy manner, without being concerned of its near depletion.
Worse than that, we always justify this attitude is because the quantities of the remaining hydrocarbon are enough for more than a hundred years. This claim is not accurate because it confuses cheap conventional oil, which feeds the global economy for decades, with the rest of the resources of the nontraditional oil that has less production from the traditional oil in a ratio of about one to ten and costs more by a tenfold.
With the seriousness of the situation concerning the energy sources that have become the basics of modern life, we do not see why it deserves attention for alternatives by the countries that are financially and technologically able.
In fact, the bulk of attention to their specialized institutions is based on pettiness, simple things such as the instability in energy prices compared to the demand in the past year compared with the expected demand in the next year, all of which are useless issues.
We need deep strategic studies based on a vision and to rely on sound information about the remaining oil reserves of conventional type, not the declared inflated figures repeated in the media for more than 20 years.
No one is interested in misleading global public opinion through the dissemination and promotion of unconfirmed figures on topics linked to the fate of people. If that was not the case as they thought, which is out of the question, the price would be high and possibly disastrous. This is because any claim neglecting the fear about the possibility of a nearby acute shortage of sources of energy supply will inevitably lead to a delay to prepare for the construction of alternative energy facilities before the energy shortages adversely affect, become worse on the fragile growth of the world economy.

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