• The season of war on oil and a new global energy system!
• The quantities of liquefied gas exported from Qatar in future will equal Iraqi and Kuwaiti oil exports together!
The past week has seen successive blows to international oil companies, to great delight in anti-oil political circles in the United States and Europe. These blows and the feelings that accompanied them confirm what I mentioned in previous articles that “climate change” is used as a tool to create a new world order, and allows a certain group to control it in a way the world has never seen before, especially with the tremendous technical progress that perhaps allows monitoring every movement, every whisper, and every wink.
And a quick look into the history since the September 11, 2001, incident, shows how people were gradually programmed to accept fewer and fewer freedoms, under the pretext of security. Then came the coronavirus closures and controlling people even in their most private life under the pretext of health security, and now the latest episode of "climate change".
The historical lesson is clear. Whoever controls energy sources has significant control. But the multiplicity of sources and the multiplicity of their owners prevent this, and this is why the slogan of “electrifying everything,” and focusing on the fact that electricity is the only source of energy.
This means that a small group can control the lives of millions of people through an electrical breaker, which cuts off the electricity and restores it as it wants. Since news and information come from the Internet, and the Internet needs electricity, cutting off electricity does not mean a lack of energy only, but also stops news and information, and most importantly, stops communication between people!
In short, the political and technical evolution of matters and their sequencing makes it difficult to deny the existence of a scheme to control the world in this way, or that things happened and there are those who are trying to turn them in their favour.
But the application of the above is still difficult, and that is why the use of the law has been resorted to to strike everyone who does not comply. This is evident from the timing of US President Joe Biden’s programmes, the decisions to stop Canadian oil pipelines that pump oil to the United States, and the electronic attack on the most important pipeline system for transporting petroleum products.
In the United States, the scenario of the International Energy Agency and the passage of the law to prosecute Opec in one of the congressional committees, then the California draft decision to stop drilling operations completely after a certain date, then the decision of a Dutch court to force Shell to reduce carbon emissions in the Netherlands, then the decisions of investors ExxonMobil, Chevron and Total by changing some members of the board of directors and reducing emissions, are among the general trends to ensure success of the war on oil.
Waging the war on oil does not necessarily mean its success, but just waging it will have negative effects on the industry in all cases. It also means increasing costs for everyone, and straining political and economic relations between producing and consuming countries, and between China and Western countries.
Here are some of the results of this war, and the resulting rise in oil prices. The list is long and some of them are mentioned below:
1 – A shortage in supplies and a sharp rise in oil prices: The least realistic scenarios indicate that it is not possible to get rid of oil and gas in the coming decades, and it is not possible to get rid of gasoline and diesel as fuel for cars, so what about the most realistic ones? This means that the demand for oil will not decrease, and based on several facts, it will rise in the coming years, but the war on oil means a continuous decrease in investment in exploration and the inability to compensate for the rates of extraction. And then global production will decrease at a time when the demand for oil continues to rise, and these developments will lead to a significant rise in oil prices. Then the war on oil will intensify, and the producing countries will be accused of raising prices. That is why the oil producing countries and major international oil companies should start a media campaign from now to warn of the rise in prices in this way in order to avoid turning the truth in the future.
2 – Due to the deterioration of the economic situation in the poor oil countries, the rise in oil prices will come later, but until that time the such countries will find great difficulty in borrowing and financing development projects.
Historically, future oil revenues have been viewed as a guarantee that these countries will pay the premiums on time. However, the different views of rich countries and international banks of the future of oil, regardless of their health or not, means that they are not willing to finance projects in these countries.
3 – Increasing the dependence of the economically weak oil countries on Western countries, as they will find themselves forced to adopt renewable energy projects with Western financing, and the increase in electricity consumption in these countries means an increase in their consumption of foreign products, including smart phones and computers, and an increase in their adoption of Western culture.
And when oil prices rise later, you will not benefit from it because most of the increase, if not all, will go to pay off debts on the one hand, and to finance imports that increased as a result of the spread of electricity linked to imports.
The truth is that electricity is the right of every human being, and “energy poverty” must be removed from everywhere, but for some countries to control the fate of poor countries, so that they determine the type of energy they use, with external funding, and ignoring the rest of the sectors, which means what was mentioned above, which is an increased dependence on imports, without achieving economic development.
4 – The shrinking of the size of the international oil companies, and the decrease of their role in the oil and gas markets, due to the decrease in the investments of these companies on the one hand, and the transfer of oil revenues to investment in renewable energy on the other hand mean the role of these companies will diminish with time.
Two things will result from this, the first is that these companies sell many assets in all parts of the industry, especially in the refining, distribution and retail sectors, and the second is the decrease in their oil reserves, due to their inability to compensate for the quantities that were produced, but the reserves may decrease for purely legal and accounting reasons, due to the low investment.
With prices dropping at a time when the coronavirus has spread all over the world, we should not be surprised if these companies announce a downward adjustment of their reserves in the coming months to meet the financial and accounting laws, especially in the United States, and this will negatively affect the value of their shares.
The beneficiary of this shrinkage in the size of the international oil companies is the national oil companies, small oil companies, private oil companies, and sovereign financing funds.
5 – International oil companies get rid of refineries, distribution operations and stations, and the fastest and best way for international and large oil companies to reduce their emissions and satisfy board members and politicians is to get rid of intermediate operations (refineries), but they may keep the pipelines and downstream operations (distribution and stations), and it will produce.
This includes a complete change in the structure of these companies, but the transfer of ownership of these refineries and distribution channels to different companies may raise costs, prevent companies from obtaining certain tax exemptions, or benefit from internal pricing between the company’s facilities, and this may result in a longer interruption of fuel supplies during disasters, especially during hurricanes in the Gulf of Mexico.
6 – Decreased revenues of oil states and states, as the oil states that depend on international oil companies will suffer due to these companies reducing their investments on the one hand, and selling some assets to different companies, and on the other hand, the matter that reduces oil revenues, whether they are taxes on corporate income or production, as well as the revenues of the US states that depend on oil and gas will decline significantly, especially in Texas, Louisiana and New Mexico.
7 – The increase in the revenues of the major oil countries, with the shortage of supplies and high demand and then the rise in prices later, the revenues of the major oil countries will rise significantly. And one of the wonders here is that the adoption of some oil countries such as Saudi Arabia and the Gulf for renewable energy means more revenues in the future, due to the transfer of some resources.
From burning oil in local power plants to export, Egypt will also benefit from converting a large number of cars from gasoline to locally produced gas. Without this conversion, Egypt would have had to import these materials from abroad during a period of high oil prices.
At a time when Russian companies will generate huge revenues, the depreciation of the dollar against the ruble will negatively affect them and raise their costs. Iran will be one of the most beneficiaries of the rise in oil prices, especially after converting a large number of cars to natural gas, and the increased dependence of the local economy on gas.
8 – The recovery of the Qatari and American gas industry, as most of the natural gas contracts are linked to oil prices, means that the rise in oil prices will raise the prices of liquefied natural gas, and one of the biggest beneficiaries will be Qatar, which is currently expanding its operations, so that the quantities of liquefied gas exported in future will be equivalent to exports of Iraqi and Kuwaiti oil put together, if we evaluate liquefied gas with the corresponding oil.
But the rise in liquefied gas prices this way will revive the American gas industry because American liquefied gas is not linked to oil prices, but rather to American 'Henry Hebb' prices, which are not directly related to oil prices.
The higher the global liquefied gas prices, the greater the profitability of US gas exports, which in turn will increase the demand for US gas and improve the industry's situation.
9 – What is the impact on universities? The direct impact of climate change policies and the war on oil is probably the reluctance of students to specialise in petroleum engineering and related disciplines. Students who are currently studying will shift to other branches, resulting in lack of sufficient number of students, and companies stopping supporting these departments. In the end, it means closing it, and if it stays, the best professors and researchers will go to other places that will generate more revenue, or enable them to continue their research.
Ultimately, when oil prices rise significantly as the industry tries to expand, there will not be enough engineers and technicians, which ill raise wages significantly, and raise the costs of the oil industry. The lack of a sufficient number of skilled workers means that the industry will be unable to respond quickly with high oil prices.
Hence, the developments during the past few weeks in the war on oil ought to have great repercussions, as some of which have been mentioned above.
* Saad Abdulla al-Kuwari is an expert in oil and gas and is exploring the future of energy.