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 Carbon Tracker Initiative (UK), since 2018, major oil & gas companies have approved around US$50bn of new investments that will not be able to thrive if countries comply with the Paris Agreement's goal to keep global temperature rise below 1.5-2˚C. A further US$21bn non-Paris-aligned project pipeline is set to be approved by end-2019.
According to a recent report, the World Nuclear Association foresees that the world's uranium resources are enough to respond to the nuclear reactor's demand beyond 2040. The current level of uranium production, which fell 14% between 2016 and 2018 (to 53,498 tU) is preventing further development of the technology. The global uranium production is expected to decrease between 2035-2040, when 25% of mines will reach lifespan, to as low as 48,100 tU (2040). Eventually, new supply will be required which means the industry needs to at least double projected primary uranium production by 2040 (including current, idled, under development and planned prospective projects).
A new study published by the Swiss government considers it is realistic for Switzerland to generate 37,400 GWh from hydro by 2035, up from the theoretical hydropower generation of 35,990 GWh on 1 January 2019. However, to meet the target defined by the Energy Act, an average net development of 85 GWh/year is required in the coming years (it has been 87 GWh/year since 2011).
According to the Socioeconomic Planning Secretary of the Philippines, energy demand in the Philippines could increase by an average 5.7%/year through 2040 under a high economic growth scenario, resulting in a four-fold increase in energy consumption. Indeed, energy consumption in the archipelago has been rising rapidly since 2010 by over 5%/year through 2017.
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