In the past year, the transportation sector had a limited flow. This was due to the lockdown induced by the COVID-19 Pandemic. This caused the demand for oil and petroleum to fall significantly. However, there was an increase in the consumption of other forms of energy like electricity due to domestic use.
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A Year of Crises for the Industry
The oil & gas industry was significantly hit by the Coronavirus Pandemic. First, there was a major decline in oil and petroleum energy demand. Then, there were attacks on vital energy infrastructure in Saudi Arabia during the pandemic. This was due to enhanced terrorist activities, thereby making the past year a critical period.
As the United States moves towards energy independence and renewable energy, the demand for hydrocarbons from the Middle East continues to decline.
In spite of this, the demand for petroleum products is set to spike significantly in 2022. OPEC has announced projections that show that the flow of petroleum is set to increase significantly. This indicates that things would change for the best.
Technology and Processes
Although the pandemic caused production to fall significantly, the methods of production and its related technology have improved. This is mainly due to the opportunity to learn and produce new solutions and deploy innovative methods. Hence, it is clear that in the coming years, the means of production in the energy sector will increase significantly.
Leading countries in the petroleum industry like Saudi Arabia took precaution. They all used mechanisms of maintaining spare capacity and productivity targets or goals that promoted spare capacity.
However, raising the capacity of production to pre-pandemic levels will take time. This is what prompted the recent OPEC-Plus meeting aimed at setting the tone to prepare for the required production capacity.
Gaining a stable output will require more policies and agreements. This will therefore mean the next few months will set be a preparation period for preparation to meet the petroleum production needs of the next year.
The Middle East, where most of the world’s oil comes from is a volatile region. At the moment the tensions between Iran and the Gulf Countries remain the main source of concern. This is an issue that could cause conflicts to erupt unexpectedly to influence projections in ways that would affect global oil prices.
However, for now, it seems things are limited to minor outbursts of conflict in a few isolated regions. Thus, the region needs some monitoring in relation to the changing trends among relevant geopolitical stakeholders of the region.
The energy sector needs monitoring. However, all indications show that trends are somewhat going to be stabilized and production levels will rise to keep prices within a reasonable range.
The industry has the resilience to adjust to the changes and this will not cause any foreseeable problems since production is likely to rise to the demand.
Geopolitically and in the geostrategic context, no real incidents seem apparent now. However, the Middle East and North Africa remains volatile, and incidents could erupt unexpectedly. At the moment, the destabilizing role of Iran in the region remains the main concern. And strategists need to understand the implications for this.
Monitoring of the region has always been a vital part of any geostrategic projection. It is therefore important to understand and appreciate the changing trends in the region to understand things that will unfold in the coming years.