PHOTO
For the next week, policymakers and experts from the energy world will be zooming in to Riyadh in the run up to the G20 energy ministerial meeting at the end of the month.
The last such gathering took place back in April, when the energy world was in the midst of its biggest crisis in decades. Oil demand had collapsed because of the COVID-19 pandemic and the economic lockdowns it caused; the stabilizing force in the global energy market — the OPEC+ alliance led by Saudi Arabia and Russia — had effectively fallen apart the previous month and a battle for market share was under way.
Back then it took a round of telephone diplomacy by Saudi Arabia, the USA and Russia to bring the oil market back from the brink.
The worst was yet to come in the form of Black Monday when US oil prices fell into negative territory, but the G20 energy summit and a simultaneous OPEC+ gathering was the turning point. Oil prices have more than doubled since the dark days of April.
The upcoming meeting of energy ministers will take place in a less febrile atmosphere. The immediate crisis has been averted, and the attendees will be able to take a more considered view of the energy future. There is a lot to consider.
Number one on their list must be the long-term effects of the pandemic, and in particular the question of when oil demand will get back to pre-COVID levels.
This has been worrying global oil markets for the past few weeks. In early summer, when it looked as though lockdowns were being cautiously lifted and economic activity resumed in a limited way, there was an air of optimism that was reflected in the recovering price of crude.
Lately, many of those encouraging signs have evaporated as the second wave of the virus — or even a continuation of the first wave — caused regionalized and partial lockdowns in many parts of the world.
So the date at which oil demand returns to the 100 million barrels a day of pre-COVID times is being pushed back. There is unanimity now that it will not happen this year, and even some debate as to whether it will happen in 2021.
The talk of “peak oil demand” has grown louder, notably in the offices of BP, which said recently we might already have witnessed the high-water mark for crude demand. That will be a hot topic of debate among G20 energy delegates.
But before they get to that, there is the big issue of climate change on the agenda. Saudi Arabia is hosting the Clean Energy Ministerial (CEM) in a few days’ time, having stepped in at the last minute when it proved impossible to hold it in Chile.
The CEM virtual gathering is a mini-G20 on the specific issue of climate and environmental deterioration that is fast becoming the single biggest challenge in the energy world. It will debate energy efficiency, renewables and alternatives to traditional hydrocarbon fuel sources, all of which have a vital role to play in the transition to cleaner energy over the next ten years.
There is need for much “blue sky” thinking on this huge issue, and Saudi Arabia’s contribution to the debate is the Circular Carbon Economy, seen by some as the potential “silver bullet” to the climate change threat.
Measures to reduce future hydrocarbon emissions are desirable, even essential, but many energy experts believe even more radical action is required: Rather than simply cutting down the amount of greenhouse gas being pumped into the atmosphere, we need to develop practical technologies and market mechanisms that will actually remove such pollutants from the air.
This will require investment on a huge financial scale, and unprecedented global collaboration. The auguries from the disparate way the world has reacted to the virus are not good.
But the Saudi Arabian CEM is an opportunity to make a clean start on this vital issue, perhaps the biggest problem mankind will face over the next decade.
The G20 helped to resolve the oil crisis back in April. Now it is turning its collective mind to an even bigger challenge.
• Frank Kane is an award-winning business journalist based in Dubai. Twitter: @frankkanedubai
Copyright: Arab News © 2020 All rights reserved. Provided by SyndiGate Media Inc. (Syndigate.info).
