x Abu Dhabi, UAESaturday 29 July 2017

Opportunity for Gulf in forecasts of US oil surge

The eye-opening IEA forecast has an important lesson for oil producing countries: in a world of incessant changes it is never to soon to start diversifying the domestic economy.

The world is full of surprises. Who could have suspected, even a decade ago, that the US would today be poised to become the world's leading producer of oil by as early as 2017?

The neo-Malthusian proponents of "peak oil", who preached that the world's oilfields are all but depleted, have fallen silent as new technologies and market forces inject vast new supplies of fuel into the engines of the world economy.

Hydraulic "fracking" and other techniques have created an actual glut of natural gas, in North America at least; prices have collapsed. Natural gas burns cleanly, emitting relatively small amounts of greenhouse gases. Now the same techniques are being used to extract oil.

The International Energy Agency, which speaks for oil-importing countries, made the 2017 prediction on Monday, adding that the US will be "all but self-sufficient" in energy by 2035. By its nature, a forecast like this one cannot be precise. The IEA study presumes both increased US production and improved automobile fuel efficiency. Some observers consider the assumptions rather optimistic.

On the other hand, the car industry is already at work to meet the tough new mileage requirements the US government is imposing. The US is, at minimum, reducing its dependency on foreign oil.

In some industries, losing the giant US market would be a disaster for suppliers. But exporters in the Arabian Gulf need not fear: the IEA says China, India and other Asian customers will soak up all the oil they can get. Taken together, the IEA said, current trends mean a change of customers for Middle Eastern oil, but no shortage of demand. As supply and demand both increase, the agency said, prices should remain in today's range of $100 to $125 (Dh367 to Dh460) a barrel.

This is good news for producers and consumers alike: stable oil markets and reasonable prices are vital to global economic growth.

More broadly, the eye-opening IEA forecast has an important lesson for the UAE and other producing countries: in a world of incessant changes in technology, politics, economics and demography, it is never to soon to start diversifying the domestic economy.

An economy built on any one commodity or service is always vulnerable to the unexpected. The UAE's strategic efforts to develop strong economic sectors beyond oil and gas are the best insurance against the next surprise.