Global economic growth will be “disappointing” in 2016, the head of the International Monetary Fund announced. IMF Managing Director Christine Lagarde said the prospect of rising interest rates in the US and an economic slowdown in China were contributing to uncertainty and a higher risk of economic vulnerability worldwide.

World crude oil prices fell 30% to 35% during 2015 ending the year around $37 a barrel. There has been no change in the conventional wisdom that oil prices will continue to fall further in the coming months.  The CEO of BP said that the low point could be in the first quarter of 2016.  Investment bank Goldman Sachs continues to say that it may take prices as low as $20 per barrel to force the production cuts necessary to rebalance the markets. Optimists see recovery of the economy and oil prices later this year. Pessimists talk of a global recession. For the immediate future, the major exporters (Saudi Arabia, Russia) maintain they are going to keep up production. The Saudis hope that by keeping prices low they can drive high-cost shale oil, tar sands, and deep sea producers  from the world market. One thing that seems reasonably clear is that the very low prices will result in declining oil production, at least in the US, Canada, and in the non-OPEC countries where oil production is in the hands of private firms that need to make a profit or at least break even to stay in business.

Prince Abdulaziz bin Salman al Saud, Saudi Arabia’s vice minister of petroleum and mineral resources, said $200 billion of investments in world energy projects were canceled in 2015, with energy companies planning to cut another 3% to 8% from their investments in 2016. This is the first time since the mid-1980s that the global oil and gas industry will have cut investment in two consecutive years.

Last month Swift Worldwide Resources estimated that the number of global oil industry jobs had declined by 233,000 since the crude price crash began in late 2014.

Nearly all members of OPEC and several non-OPEC oil exporters such as Russia, Canada, and Mexico are suffering from large revenue losses brought about by the severe price drop in crude oil. Ten out of 12 OPEC nations are dependent on oil exports for over 85% of their export revenues; when those revenues dropped during 2015, national budgets got squeezed and deficits grew, often explosively. Countries such as Venezuela, Nigeria, and Angola are facing political instability in the next year or so.

OPEC said that $10 trillion worth of investment will need to flow into the world oil and gas business through 2040 in order to meet the world’s energy needs. OPEC does not see crude oil prices exceeding $100 within the next 25 years. The producer organization expects oil prices to rise by an average of about $5 per year over the course of this decade, only reaching $80 per barrel in 2020. From there, it sees oil prices rising slowly, hitting $95 per barrel in 2040.

Iran’s National Oil Company says it has the ability to boost crude oil production by 500,000 barrels a day within a week of the economic sanctions imposed by the West being lifted and by 1 million b/d shortly thereafter.

China expects the use of coal for energy to decline from 64.4% in 2015 to 62% this year. In addition it expects renewable energy to provide 13.2% of its energy consumption this year versus 12% for last year. The Chinese government intends to install 20 million kilowatts of wind and 15 million kilowatts of solar power in the next five years as well as numerous nuclear power plants along the Asian country’s eastern coast.

In Ireland, Shell and its partners began extracting natural gas from the offshore Corrib field to an inland terminal after gaining final consent from Ireland’s Department of Communications, Energy and Natural Resources. The Corrib gas field was discovered in 1996 but controversy about location of on-shore pipelines delayed the project’s completion for nearly two decades.

As drought continues to cripple its hydropower plants, the east African country of Tanzania is struggling to produce electricity and is moving toward using more fossil fuels to make up the shortfall. Hydropower plants normally produce about 35% of Tanzania’s electricity needs. In October the country was forced to shut down its main hydropower facility for nearly a month because the water level was too low to run the turbines.

Cheniere Energy is getting ready to become the first US terminal to export natural gas from the country’s shale gas formations. The company is receiving about 50 million cubic feet of the fuel a day, chilling it into liquefied natural gas (LNG) at a terminal in the Gulf Coast state of Louisiana, and storing it in tanks before the first export. Cheniere expects the first cargo will be shipped this month.

Because of the massive fall in crude oil prices over the past year, American drivers have saved a collective $115 billion during 2015 as petrol prices plummeted.

 

with h/t Tom Whipple

 

 

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