How long could the current oil war continue?
- By Zhang Jingwei
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E-mail China.org.cn, February 18, 2016
So far, however, this oil war is nothing compared with the one in the last century when OPEC was able to call the shots worldwide. The current struggle is a contention between old deposits and new technologies, and one between oil exporting countries and industrial powers.
For Saudi Arabia and its peers, an oil war against the United States just means to invite defeat, while one against Russia likely won't bring about success, and one against the other non-OPEC countries will end in a loss for all sides.
OPEC's reluctance to cut its output has largely been blamed on Saudi Arabian obstinacy. The UAE energy minister's remark reflected internal struggles that, in a worst case scenario, could see OPEC fall apart.
In fact, even if the oil war ends immediately, and all oil exporting countries announce reductions in output, the global oil prices won't recover that much; there is no way that the price could return to above US$100 per barrel.
First, shale oil exploration increases the supply in the international market, apart from ending the OPEC's monopoly. Second, the excessively low prices amount to a serious warning to OPEC in that being entirely dependent on oil exports not only leads to financial crisis but can threaten national security; on the good side, this trend will facilitate Gulf countries' industrial optimization.
Third, the oil war has increased many countries' oil reserves by pumping excessive supply into the international market. Hence, despite reduction in output, to accommodate the existing surplus will take some time. And fourth, in the still-gloomy international market in which major commodities all suffer from low prices, crude oil is not an exception.
In the larger picture, ecological civilization starts to take hold globally, leading to international treaties on emission reduction. Clean energies will soon become the market mainstream, replacing non-renewable crude oil to fuel global growth.
Zhang Jingwei a researcher of the Charhar Institute.
This article was first published in Chinese and translated by Chen Boyuan.
Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.
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