Saudi oil helps to lubricate the G20 global growth engine
The G20 is all about “ensuring the stability of the global economy,” and let’s not forget that it constitutes more than 80 percent of that global economy by gross domestic product. Two-thirds of the world’s population live in the G20 countries.
Saudi Arabia is chairing the group in 2020 in what will be a pivotal year, where the global economy is threatened not only by slowing growth, but also rising geopolitical tensions and the threat of a global pandemic thrown in for good measure.
Amid such a fraught backdrop, Saudi Arabia is in a unique position to help provide desperately needed energy security as the only swing producer of crude oil.
The Kingdom leads the G20 meetings this year with a very long history in delivering stability in turbulent times, and never more so than in recent years, when it has helped to steer the direction of the OPEC+ group of exporters. In fact, we have now entered into the fourth year of this unique pact among producers.
The long-term outlook for oil demand is expected to increase by some 12 million barrels per day (bpd) to reach 110.6 million bpd by 2040.
Despite the rapid uptake of renewable energy sources both in the Kingdom and the wider world, oil is expected to remain the fuel with the largest share in the global energy mix in the long-term outlook to the year 2040.
Seeking a decarbonized future does not mean removing oil because the world — and especially the economies of the G20 — still cannot live without it.
Transport demand over the long term also continues to be dominated by oil, despite the increasing use of natural gas, electricity and biofuels.
But it’s not just about transportation. In fact, the fastest-growing driver for oil demand growth is the petrochemicals industry, where it is used as a feedstock.
The rise of the global middle class means the need for petrochemicals will also increase, as petrochemicals are at the foundation of the manufacturing process of products ranging from paint to personal care items.
Hence, oil demand will keep growing, driven by the fast-growing developing economies. While analysts expect the pace of that growth to slow over time and to eventually plateau, that may be some way off.
The circular economy approach does not mean to minimize or demonize oil, even if it does lead to lower energy consumption and the reduced generation of waste.
Seeking a decarbonized future does not mean abandoning oil because the world — and especially the economies of the G20 — still cannot live without it.
- Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq