The price of Brent crude oil has increased to $86 per barrel. The recent surge in price is primarily due to a significant production cut by the largest oil producer among the members of OPEC, the cartel of oil-exporting nations. This demonstrates greater control over production rather than pricing. The price trend in crude oil prices after COVID-19 is much lower than what we saw after the GFC.
It seems that the pricing power of the oil cartel may continue to weaken. Major structural shifts are underway in the global energy space.Improvements in energy efficiency have led to a decrease in the amount of oil needed to generate similar economic activities. For example, in India, 0.7 lakh tonnes# of imported oil are required to create 1 US$ billion of GDP in 2021-22, compared to 1.6 lakh tonnes# in 2001. This trend may also be occurring in other parts of the world, as the fuel efficiency of vehicles has improved worldwide.
Moreover, the increase in electric vehicles (EVs) is a major contributor to the reduction in oil demand. Bloomberg reports that EVs have already replaced 1.5 million barrels per day of oil usage*, and this number is expected to grow significantly in the future. The International Energy Agency predicts that by 2030, EVs could result in a decrease of global oil demand by 5 million barrels per day**. This reduction is equivalent to more than half of Saudi Arabia's current daily oil production, which is currently at 9 million barrels per day***.
ev oilprices gdp energyefficiency economy McBE
* https://lnkd.in/dVHChpFz
**https://lnkd.in/dMmNJpTf
*** https://lnkd.in/d3s2BDYn
# Author's estimate
