The history of oil and gas prices has followed a golden rule for decades: "What goes down must come up!"
Right now, the oil price is again under US$ 50. Once again, people are asking what is important. Are alternatives not immediately necessary after all? Or is the energy issue still threatening the world with huge challenges and turbulence?
Some EU countries would face big problems if gas stopped flowing through Russian pipelines. In 2014, the EU Commission presented the findings of a stress test that simulated the consequences of a gas conflict with Russia in various scenarios. Initially, the countries most affected would be Bulgaria, Finland and Estonia. In the worst-case scenario, a complete cut-off for six months would also deprive Romania and the other Balkan countries of at least 40 percent of their energy requirement. According to the EU report, a large part of the shortfall could be made up by importing liquefied natural gas (LNG), however that would be extremely expensive because Asia also buys LNG on the global market.
Greek shipping lines dominate the marine transport sector, controlling around 12 percent of all ships on the world's seas. Massive tax evasion in Greece is one of the reasons for the country's economic crisis, but the money hasn't simply disappeared. Currently, Greek shipping magnates are betting on the volatility of energy prices, in 2014 earmarking a record sum of $ 1.8 billion to order eleven new liquid gas tankers. Their reasoning is that falling gas prices boost the demand for the transport of LNG. What's more, European countries want to reduce their dependency on Russian gas supplied through pipelines.
There's also the prospect of the USA exporting LNG worldwide as from 2018. The three South Korean shipyards building the tankers are reportedly working to full capacity. At the same time, the prices for future orders have already risen by approx. $ 20 million per ship. The reasons are clear: Demand is booming, and payment flows via intermediate offshore companies enable vast additional profits to be made for brokering orders. Forecasts indicate that up to 2018 or 2019, more than 30 LNG tankers will be supplied by the South Korean shipyards, providing plenty of opportunity for corresponding commissions. Companies such as BP, Mitsui (Japan), Petronas (Malaysia) and Greek shipping lines are among the main customers.
In the middle of last year, the Libyan oil export terminals Es-Sider and Ras Lanuf re-opened after lying dormant for over a year. Shortly afterwards, Libya once again shipped oil across the Mediterranean to Europe. That meant Nigerian oil, which was already no longer in demand in the USA and Canada, also lost its customers in Europe. Therefore, more and more supplies are going to China. However, Islamist militia have been fighting in Libya since mid-December, and two rival governments are struggling for power. Since then, oil production has more than halved again.
These terrorist activities suit Saudi Arabia, which was already keen to prevent Nigeria from building up permanent relations with refineries in Asia. The strongest growth there has been in imports from Nigeria, Azerbaijan and Angola. The kingdom flooded the market in a kind of dumping operation. They did this by cutting their official crude oil price in Asia, and were followed by Iran and Kuwait within a week.
Nigeria's problems are similar to those of Russia – another major oil exporter whose economy is suffering under a declining oil price as well as under Western sanctions because of the Ukraine crisis. Oil and gas account for approx. 96 percent of Nigeria's export income, while the figure for Russia is approx. 66 percent, and 50 % of the national budget depends on oil revenue. To achieve a balanced budget, the oil price needs to be $ 115 a barrel. In 2012, revenue from oil sales in Russia was $ 290 billion, and the figure from gas sales was $ 68 billion.
36 percent of Europe's gas supply flows through pipelines from Russia, with Germany importing more than a third of its gas from there, Hungary more than 80 percent, and Slovakia dependent on Russian imports for 92 percent of its gas. The most important transit country is Ukraine.
According to estimates by the foreign trade association BGA, Russia would lose $ 100 million per day if it cut off energy exports to the EU.
Qatar's history as an oil exporter started back in the 1950s, when it was still a British protectorate. Its reserves were exploited by the Anglo-Iranian Oil Company, the predecessor of BP. But the real boom started with independence in 1971 and the subsequent nationalization of oil production in 1974. Now Qatar is investing in the next boom: natural gas. The world's largest natural gas field lies off the coast of Qatar. Qatar has long aimed to dock these vast reserves onto the European pipeline network. But it faces just two problems: Syria and Iraq as possible transit countries for a planned "Qatar-Turkey pipeline".
Liquefied natural gas is Qatar's Plan B. First it was Syrian dictator Bashar al-Assad who, under the influence of Russia and Iran, stood in the way of the project, now it is the IS terrorist groups. In principle, Qatar is sympathetic to them because of their Salafist Sunni religion, but now, because of the daily reports of terror attacks, Qatar officially opposes the groups and is fighting them together with the USA and the international "Coalition of the Willing".
A similar dynamic and tragedy is playing out in Nigeria, where human rights abuses are rife and the militant Islamist group Boko Haram attacks both civilians and the armed forces, bombs marketplaces, mosques and schools, and abducts hundreds of girls and young women.
It's the familiar story of wars being fought for purely economic interests - for oil and gas! Is this what we want?
Principles, especially moral ones, need to be (re)established to put social and political order onto a sustainable basis.
The political classes often make the mistake of seeing climate protection and renewable energies as a luxury problem that can be postponed until better times. Yet they remain an important factor in globally necessary political action, and also provide a way out of global crises and chaos in regions subject to the geopolitical interests of big corporations and states.
Oil we don't consume is oil we don't have to buy from the Arabian peninsula, Africa or Russia. A peaceful, climate-friendly growth policy would unlock global investments totalling approx. $ 90 billion in urban infrastructure, energy systems and the transport sector. The results would be peace, jobs, better health, productivity and improved quality of life.
Considering our resource dependency, certain cost discussions about the German energy transition seem especially narrow-minded: In the EU we spend one million euros every day on imports of fossil resources!
BP's current energy outlook for 2035 projects the following market development:
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