With the transition to green energy .. Will oil prices fall?

The 30% rise in oil prices since the beginning of this year has contributed to optimistic expectations regarding the future of oil prices, including the possibility of a 10% rise in Brent crude prices this year.

In an article published in the Russian newspaper Izvestia, the writer, Oksana Belkina, stated that the oil market situation does not bode well in the long term, after experts from Wood Mackenzie - a global energy, mineral and mining research and advisory group, expected Brent crude prices fell to $ 10 a barrel after the transition to green energy.

Pre-crisis level

Energy demand began to recover after the waves of decline in the oil market in 2020 due to the spread of the Corona pandemic, thanks to the recovery of the economy, the launch of the pollination process and the partial lifting of restrictions imposed by the virus, and as a result, the price of Brent crude has increased by 30% since the beginning of this. On the other hand, oil prices recorded a new low with the entry of March.

Expectations in the near future regarding oil prices bode well for optimism, and despite the uncertainty due to the outbreak of the Corona virus in a number of countries, expectations for oil demand have improved significantly, and accordingly, all hopes are directed towards the recovery of the global economy, which will stimulate demand The global demand for fuel, according to the forecasts of the International Energy Agency, the volume of daily global demand this year may reach 96.5 million barrels, which is about 60% of the volume lost last year due to the epidemic.

According to forecasts by the International Energy Agency, the price of Brent crude may reach $ 74 a barrel this year, as this growth will be driven by the survival of only about 23% of the excess oil reserves accumulated during the epidemic in the storage facilities of developed countries, while the reserves of developed countries accumulated in July / In July 2020, by 249 million barrels, these reserves decreased in February 2021 to 57 million barrels.

Oil demand will start to decline by 2023 after the transition to renewable energy (Pixabay)

The Green Agenda

All optimistic expectations are fading against the background of the report published by Wood Mackenzie experts, and according to the report's authors, oil demand will begin to decline by 2023. By the middle of the twenty-first century, it will decrease by 70% compared to the figures present today, according to Wood Mackenzie experts, This scenario will materialize if the leading economies move decisively toward achieving the goals of the Paris climate agreement and switching to green energy.

In fact, the agreement is based on effectively combating greenhouse gas emissions to limit global warming, and accordingly, the threat, according to experts, is in the electrification of transport and industry, which will lead to ignoring the use of oil from the energy field and actually destroying the market, and in this case, the price will drop Brent crude by 2030, with a price ranging between 37 and 42 dollars per barrel, while it will reach 10 dollars in general by 2050.

However, other experts believe that such expectations are far from reality. At present, transportation, including airplanes and cars, is unique to 65% of global fuel consumption, and the reason for this is that aircraft have not yet switched to green energy sources. Which means there is a demand for gasoline for a long time to come.

"The transition will happen gradually, starting with light vehicles," said Penza founder Mikhail Kolesnikov.

Find its use

Experts assert that the market will not allow oil to drop to $ 10 a barrel, and as long as the possibility of its production exists, there will be ways to use it. For example, oil can be used for heating or in the production of polymers that will replace structural steel. As for renewable energy sources, it is not met. The volume of electricity generated on its basis is only 27% of the world's needs.

For his part, Aziz Kingaev, development manager of the Overbit trading platform, says that with the advent of electric motors, fuel consumption in the transportation sector may decrease.

On the other hand, consumers and factories will travel longer, knowing that oil is not only used in the production of fuel, but also in other materials needed by all mechanical machinery.

"As long as the carbon-consuming sectors in the economy do not turn to green energy, the price of oil will continue to rise, and the price per barrel may reach $ 80," Kingev said.

For his part, analyst at "Freedom Finance", Anton Sklovitz, said that the gradual transition to green alternatives in the future after 10 or 15 years is capable of reducing the demand for oil and petroleum products, and as a result, a gradual decrease in the price of a barrel, and in return, it is necessary Realizing the fact that there are no real alternatives in light of not making electric cars available to everyone, and the same applies to electric trucks in addition to the dependence of aircraft and heavy equipment on petroleum products.