We listened to Fatih Birol, the chief economist of the International Energy Agency, on the last day of the 4th Bosporus Summit on "Sustainable Global Competition in the Middle East and North Africa."
The Global Energy Outlook 2013 report, prepared by a team working under Birol and eagerly awaited by the players of the energy markets, was issued in London 10 days ago [Nov. 12]. At a time when the roles of the world energy actors are being redefined, we heard the latest information on the Middle East and the US from a most authoritative expert.
US will overtake Russia
Birol’s answer to the question of whether or not the key role of the US in the Middle East is diminishing, after the booming shale gas and shale oil production in the US, was unequivocal: "The Middle East will remain as the heart of the world oil markets in the future as well.” According to Birol, these are the most critical developments in the world energy markets of recent times:
- The US, which had been the world’s leading energy importer until yesterday, in 2015 will overtake Saudi Arabia and Russia as the world’s leading oil producer and the top exporter of shale gas.
- Consumption of oil in the Middle East is rapidly increasing, making the region felt not only as a producer but also as consumer.
- For years, Canada had exported oil and natural gas to the US. Now that US doesn’t need it, Canada is turning to Asia as a market.
- In 2015, Brazil will become an oil exporter.
Half of the worldwide $500 billion in energy subsidies are paid in the Middle East. In countries like Saudi Arabia, Iraq and Iran there are serious amounts of subsidies in oil and natural gas prices. As such, subsidies impede productive use of energy and consumption increases more than needed.
Birol said 35% of electricity production in the Middle East is oil based and used a humorous analogy: “This is a very serious mistake, because oil is the most expensive input. To use oil in electricity production is like using Chanel perfume as truck fuel. Anyway, the most wasteful, unproductive use of energy in the world is in the Middle East."
As much as China …
Birol said the US economy is on the verge of a phenomenal "comeback." He said two-thirds of the increase in world energy consumption will come from Asia. But as Chinese demand will be sated by 2020, the engine after that year will be India. According to Birol, in 20 years the oil to be consumed in the Middle East will equal the current Chinese consumption. That requires building new power stations producing 380 gigawatts, which means the needs of Japan and South Korea put together.
Suggestions to Turkey
Birol said that if the Middle East is becoming a major consumer and continues to waste energy by unproductive use while developing its trade with Asia, the Turkish business world has to start taking action. He concluded: "If we want an increase in Middle East oil in 2020, we have to invest from now. Today the biggest investors in Iraq are the Chinese. Turkey must take action in northern Iraq and Iraq itself."
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