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Energy anxiety

Published by , Senior Editor
Hydrocarbon Engineering,

These days, the growing divide between Asia and the West is not just confined to trade issues or human rights. The oil market’s outlook is just as bifurcated, with the West relaxed about long-term energy prices as it focuses on peak demand and rising production, while a jittery Asia is increasingly worried about the lack of stockpiles amid the threat of supply disruptions.

The International Energy Agency’s (IEA) latest forecast for benign market conditions over the next two decades should be a source of comfort, but Asia’s mostly oil-deficit economies are far from comforted. The IEA’s ‘World Energy Outlook 2019’ report affirmed the prevailing dual themes of rising supply out of the US, and slowing global oil demand from 2025 leading to the flattening of growth from 2030.

But Asia’s oil appetite is unlikely to diminish despite a slight slowdown in demand growth in recent years. The region is forecast to continue expanding its share of global oil consumption, having risen from 30% a decade ago to over 36% today.

While rising energy consumption underlines Asia’s continued economic expansion, it also points to the region’s deepening oil addiction, for which there seems to be no cure. Increasingly, Asia is dependent on oil imports from politically unstable producing countries in the Middle East and Africa.

On 14 September, Asian consumers were given a timely reminder of their vulnerability to supply shocks when military drones attacked two of Saudi Arabia’s main oilfields, briefly shutting down more than 5% of global production.

The benchmark Brent crude price surged nearly 20% to just under US$72/bbl the following trading day, due in part to panic-buying in Asia.

Prices fell back over the next three weeks after Saudi Arabia convinced the market it was on course to fully restore operations at the affected fields.

Nevertheless, the attacks have struck fear throughout Asia, especially in India and China which will drive the bulk of the oil industry’s growth over the next two decades….

This article was originally published in the February 2020 issue of Hydrocarbon Engineering. To read the full article, sign in or register for a free trial.

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