How will oil prices evolve in the foreseeable future? Will petroleum still be able to compete with other sources of energy, or at least, to maintain its share in the markets during the coming few decades? In fact, the fluctuations in oil prices have recently become a challenging problem for both producers and consumers. In this regard, the International Energy Agency (IEA) published its “Medium-Term Oil Market Report for 2009”, which takes into account the economic crisis and its immense effects on energy and oil. The study argues that the decline in oil demand for two consecutive years (2008 & 2009) was caused by the worst economic crisis seen since half a century and which “resulted in tremendous and unusual changes. The price of oil today (around $70[per barrel]) is about half of what it was in July, 2008, when it reached a peak of about 147 dollars. This is despite the improvement seen in prices following their fall to the lowest price of $35 earlier this year, apparently an improvement that is boosted by expectations of an upcoming economic recovery.” The IEA report then concludes that the oil market “is now at a crossroads”. Because of the ambiguous situation facing the global economy, the agency put forward two potential scenarios for the future of oil markets. The first envisions a slow and late recovery of the global economy, while the second adopts an optimistic outlook for worldwide economic growth in the foreseeable future, basing itself on the forecasts of the International Monetary Fund (IMF) in April 2009. The IMF forecasted for the years 2012-2014 an increase of 5 percent in the GDP annually. However, the most important conclusion reached by the Agency was that “the quality and the timing of the economic recovery will be the most important factors affecting the equilibrium of the oil markets in the foreseeable future”. The problem here is that the world economy, and despite the near end of the financial crisis, and the many actions taken to prevent the collapse of major banks, such as Lehman Brothers, the economy is still fragile. There are extremely high levels of unemployment, where, for example, half a million people are monthly joining unemployment in the United States while the situation is not much better in Europe. At the same time, economic analysts in the Barclays bank expect a marked improvement in the demand for oil during the second half of the current year, as a result of economic recovery in Asia, and economic stability in the United States and Europe. Barclays assesses that this improvement will prompt an increase in the oil prices to about 75-80 dollars in the second half of this year, which is the “fair price” referred to by some OPEC members in recent months. As for the distant future, and the effects of the competitiveness by the alternative renewable energies on oil market in the coming decades, the CEO of Royal Dutch Shell Jeroen van der Veer wrote an article published in the London Times in which he talked about a promising future for alternative energies. According to van der Veer, this would only happen in case “proper legislation and regulations” were put in place, “as this would lead by 2050, for an increase in the share of renewable energies in the market to about 30 percent”. He also added: “The share of biofuels produced from agricultural crops may amount to up to 10 percent of transportation fuel within two decades”. He also explained that the scenarios developed by his company indicate that “about 15 percent of new cars in the world by 2020 will be hybrid cars”. However, there aren't many indications that the future will be dominated by one type of transportation fuel only, but rather that there would be a multitude of fuels used, “which would be beneficial to consumers”. This means that it is very possible for us in the future – in the stead of dominance by traditional oil on the transportation sector for the time being – to have many types of transport fuels in addition to traditional gasoline and diesel, such as electricity and biofuels (produced from crops), natural gas, and hydrogen. Nevertheless, an important issue should be brought to mind here. What will help traditional petrol or diesel in maintaining their share of the energy market in the future - especially when it comes to the transportation fuel market - and despite the expected competition with sustainable alternatives, is the expectation of large annual increases in energy consumption. This is because of the improved standard of living worldwide, and the economic progress expected in densely populated countries, which will also increase their consumption of energy. * Mr. Khadduri is an energy expert
