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Saudi Ex-Oil Minister Not Worried About Demand Forecasts

Saudi Arabia’s former oil minister, Ali al-Naimi, is not worried about demand forecasts that suggest OPEC may have a hard time keeping prices high enough for everyone’s comfort thanks to the growing adoption of renewable energy systems and electric vehicles—the goal of climate change policies around the world.

Al-Naimi expressed his confidence that falling demand in certain industries will be compensated for by other segments, but stopped short of providing details.

Petrochemicals are seen as a major growth segment for the future of oil while demand for fuels declines as electric vehicles on the roads of the world multiply. Aramco is investing heavily in petrochemical projects, and it doesn’t seem overly concerned about electric cars, perhaps with good reason.

Despite all the optimistic forecasts about EV adoption amid a string of government plans to phase out all internal combustion engine vehicles in the coming decades, over the medium term at least, ICE engine vehicles will continue to greatly outnumber EVs — even the optimistic forecasts agree on that point.

In tune with these projections, Aramco is investing in fuel-efficient engines in partnership with a U.S. lab. But at the same time, Saudi Arabia, which has an estimated 260 billion barrels of crude in reserves, is planning major renewable installations. That’s as clear an acknowledgement that renewables are here to stay as any.

Al-Naimi also acknowledges it. Speaking at an even in Bahrain, the former official said Saudi Arabia should diversify into minerals such as silica and into solar power.

Last month, the incumbent in Saudi Arabia’s Energy Ministry, Khalid al-Falih, said that the Kingdom’s total mineral resources are worth north of US$1.3 trillion, and that’s just the value of the raw materials, not counting the products that they can be turned into, al-Falih said. There are plans to increase Saudi Arabia’s base and precious metal production tenfold and make it one of the top ten aluminum producers globally.

By Irina Slav for Oilprice.com

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  • Mamdouh G Salameh on March 06 2018 said:
    Former Saudi oil minister, Mr Ali al-Nuaimi is right not to be worried about suggestions that OPEC may have a hard time keeping prices high enough for everyone’s comfort thanks to the growing adoption of renewable energy systems and electric vehicles (EVs).

    Oil is so versatile that falling oil demand for global transport as a result of wider use of EVs will be more than offset in multitudes of other uses. And despite a projection by BP that there could be 320 million EVs on the roads by 2040, the impact would hardly make a dent on the global oil demand by then.

    Bringing 320 million EVs on the roads, if it is possible within the time frame, will reduce the global oil demand by only 5.2 billion barrels (bb), or 6.9% by 2040. This will neither be the peaking of oil demand nor a tipping point.

    Still, for the Gulf Cooperation Council (GCC) countries - Saudi Arabia, UAE, Kuwait, Qatar, Oman and Bahrain – there would be no post-oil era ever.

    Contrary to widely accepted wisdom, oil will remain an integral part of the Middle East economies throughout the 21st century and far beyond. Even if cheap alternatives to oil in transport, water desalination and electricity generation were to become readily available in the future, oil will not be left underground because the Arab Gulf oil producers will use it to power thousands of water desalination plants to generate enough water not only for drinking but also for irrigation to make the desert bloom again. They will also use it to dominate the global petrochemical industries and any industries in which oil is a feedstock.

    Oil will continue to reign supreme through the 21st century and maybe far beyond.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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