oil market

Deputy crown prince Mohammed bin Salman answers questions in Riyadh on Vision 2030  © Getty Images

Saudi Arabia is in a mess. That conclusion seems to be common ground — the view of serious outside analysts and of the country’s own government. The only question is whether the problems can be corrected by shock treatment of the sort announced in Riyadh last week.

The immediate challenge is clear. Last year, revenue from oil exports fell by 23 per cent. That matters in a country that is 77 per cent dependent on oil income. Unemployment is officially 11.6 per cent, not counting the millions who hold non-jobs in and around the agencies of the state. In total, 70 per cent of Saudis work for the government. In the first half of last year, according to Mohammed al-Sheikh, the chief economic adviser to the all-powerful deputy crown prince, Mohammed bin Salman (known universally as MbS), the kingdom’s financial reserves were being drawn down at a rate that would have exhausted them by the end of 2017 — far earlier than had previously been estimated by outside authorities such as the International Monetary Fund. Read more

Oil refinery. Getty Images

The energy market is moving on two very different tracks. Oil prices are stubbornly high and gas prices are low, especially in the US, and look set to fall further across the world. The question is when, if ever, will these two tracks meet?

Let’s start with why the oil price at $114 a barrel for Brent remains so high. There is no physical shortage and demand growth worldwide is minimal. The answer lies in fear of what might happen next. The threat of an open conflict between Israel and Iran may have receded but there are enough uncertainties in the market to keep people nervous. Libya is out of control because of the limited international support for the new government following last year’s military intervention by France and Britain. There is continued nervousness about events in Algeria after the terrorist attack last month and concern about the negative effect on investment of the renewed outbreaks of violence in Iraq. Read more

A large proportion of oil is now exported to China. Getty Images

The International Energy Agency is one of the more successful of all the international institutions. It has avoided the rocks of ideology – unlike the IMF – and the sands of overweening bureaucracy – unlike the World Bank.

The Agency produces some excellent studies and first class data. But it badly needs to keep up with the times. No international agency working on energy should be excluding China and India from full membership.

The IEA was established in 1974 as a grouping of energy – particularly oil – importing countries to combat the market dominance of Opec. The crucial agreement behind its establishment was acceptance of the need to share the burden of adjustment in the event of any major supply disruption. “Rationing” – though the word was never used – was clearly preferable to a free-for-all bidding war in which countries sought to secure supplies for themselves. Read more

Chatham House explores what's next for the oil and gas industry in its latest paper. Getty Images

Anyone wanting a little bracing reading material for the Christmas holidays should take a look at the excellent paper recently produced by the Energy and Environment Programme at the Royal Institute of International Affairs – Chatham House. The paper – What Next for the Oil and Gas Industry – provides an unusually wide ranging view of the energy scene and will be of interest to anyone involved in the industry – from investors to governmentsRead more