Low-cost oil producers will start to question why there are rationing supplies and this will have “huge implications” for the oil market, said Spencer Dale, Group Chief Economist at BP.
Addressing the annual BP lecture at Alliance MBS, Dale – a former chief economist at the Bank of England – said in no other industry could you have a country such as Saudi Arabia, where it costs just $10 to produce a barrel of oil, operating in the same market as a country like Canada where it costs $30 to $40.
“There are 2.5 trillion technically recoverable barrels of oil, more than enough to meet world demand for oil until 2050 twice over. We are not going to run out of oil, so why are we rationing it? I can see low cost producers all starting to question why they are rationing oil, but the pace at which that will happen is unclear.”
Dale said this issue had major significance given the soaring demand for energy in coming years from emerging economies. “Energy is critical to the future prosperity of the world. Two billion people will be lifted from low incomes to middle incomes over the next 20 years and demand for energy will increase significantly. All that increased demand will come from emerging economies.”
He said the world faced a dual challenge – it needs more energy to meet this soaring demand but less carbon. “Solving this is the big challenge we all face working in the energy industry,” he added.
Dale said the determinants of oil supplies - when the fuel is not exhaustible - was one of three key questions in this context. The second was the extent to which LNG (Liquefied Natural Gas) would change global gas pricing, while the third was how quickly renewables would penetrate the energy system. “If we knew the answers to these three questions we would be well on the way to solving the energy challenge.”
He predicted that the next few years would witness enormous growth in the LNG market because of its ability to be transported very flexibly around the world and not be reliant on pipelines.
“LNG creates a globalised gas market like the globalised oil market of today. This has huge implications for energy transition and LNG can particularly help drive the transition from coal to gas in emerging economies with no access to pipelines.”
He said that because the US exported LNG most widely across the globe, US gas prices will act as a natural anchor for the market in the future. “We expect natural gas to be the fastest growing fossil fuel, with shale gas able to grow very rapidly too. The growth of LNG provides the means of getting that gas to market.”
In terms of how quickly renewables will penetrate the energy system, Dale said history teaches us that energy transitions take a very long time, largely due to the huge shift in resources and finance that is required.
He added: “Will renewables be any different? We expect renewable energy to grow quicker than any fuel in history, but by 2035 it will still only be about 10% of world energy needs, which means 90% still needs to come from somewhere else. However we see gas as a complement to renewable energy as it is a flexible, low carbon fuel.”
Friday, May 26, 2017
Did you know starting a business is one of the main reasons for studying an MBA? Our Full-time MBA candidates have lots of opportunities to develop their entrepreneurship skills.
Friday, May 19, 2017
Although awareness of mental health issues has greatly increased in recent years, far more still needs to be done to tackle it in the workplace.
Tuesday, May 2, 2017
Despite the ‘compelling” business case for having more women on company boards the move towards gender equality in the boardroom has stalled. Our Vital Topics panel debate on ‘Diversity at the top’ heard that there remained a complex and often contradictory array of reasons as to why more women did not hold senior management positions. For instance there are still only seven female CEOs in the FTSE 100 today.
Monday, May 1, 2017
The Financial Times’ new ranking of Top MBAs for Finance sees Alliance Manchester Business School ranked 29th in the world and positioned as 5th in the UK and 10th in Europe.
Wednesday, April 26, 2017
One of the world’s leading university ranking groups, QS (Quacquarelli Symonds), has today ranked Alliance Manchester Business School’s Global MBA as 5th in the world.
Tuesday, April 11, 2017
Charities, businesses and community groups across the world will be able to streamline and improve their response to emergencies and disasters, thanks to a new International Standard initiated at Alliance Manchester Business School.
Monday, April 10, 2017
The opportunities and threats posed by machine learning were debated during a lecture by serial entrepreneur Hermann Hauser at Alliance MBS.
She’s got the power – ethical energy boss scoops outstanding entrepreneur award this International Women’s Day
Thursday, March 9, 2017
Innovative energy boss and MBA Class of 2016 Class President Cheryl Latham has scooped the ‘Outstanding Entrepreneur’ gong at this year’s Northern Power Women awards.