The oil price is expected to push above US$60 per barrel due to both (geo)political reasons (in particular tensions in e.g. Venezuela and Libya, along with US sanctions in other countries like Iran), as well as to a convergence of interests between OPEC and Russia, both of which have declared their intention to limit production levels. However, with a rising US production this is not necessarily sustainable on the long run. Saudi Arabia has indeed a short-term interest to push up the oil price in order to better valorize Saudi Aramco’s possible partial privatization.
In the long run however, the Kingdom, with the world largest low-cost oil reserves and aware of the importance of energy transition worldwide and the risk of sitting on stranded reserves, will have a clear interest to fight for market shares and not for price. Oil prices are hence expected to remain between US$50 and US$80 per barrel until 2040. For short periods of time, the price may spike in any direction, responding to short term economic, financial and/or political events, rather than fundamental long-term market realities. The current oil price of US$60-70/b already incorporates in our opinion a geopolitical risk premium of some US$10-20/b.
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According to the Short-Term Energy Outlook (STEO) released by the US Energy Information Administration (EIA), energy-related CO2 emissions in the United States are expected to reverse their 2018 trend (+3%) and to decline by 2.2% in 2019. Energy-related CO2 emissions would decrease by 114 Mt in 2019 and most of the drop would come from coal-related emissions (-13%, i.e. -168 Mt); this would be the largest decline in CO2 emissions from coal since 2015. Coal-related CO2 emissions are expected to decline by a further 3.6% in 2020.
According to the US Energy Information Administration (EIA), the installed capacity of utility-scale (above 1 MW) battery energy storage systems (BESS) in the United States could reach 2.5 GW by 2023.
The Indian government has presented its Economic Survey 2018-19 to the Parliament, which estimates that US$330bn will be invested in renewable energies through 2030: investments in renewable power plants - not including power transmission projects - until 2022 could reach US$80bn (at today's prices) and an additional US$250m would be required over the 2023-2030 period, corresponding to an average US$30bn/year investment level.
According to the Central Electricity Authority (CEA) of India, the share of coal in the Indian power mix should remain dominant until 2030, despite a planned decline from around 73% in 2018 to around 50% in 2030. This erosion is related to the current boom in solar and wind projects. Non-fossil fuel sources are expected to reach 65% of the installed capacity and 48% of total power generation by 2030 (including 23% from solar, 12% from wind, 8% from hydro and 4% from nuclear). However, a large portion of India's existing fleet of coal-fired power plants will remain operational through 2030 bringing coal to account for 1/3 of the power capacity and 50% of the power generation and will contribute to rising CO2 emissions.
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