As the attack on Saudi Arabia’s Aramco oil facility showed over the weekend, tensions in the Persian Gulf can have a profound effect on the global oil economy. Speaking to Rudaw on the sidelines of the 24th World Energy Congress held in Abu Dhabi last week, Dr. Atul Arya, Senior Vice President and Chief Energy Strategist at IHS Markit, said geopolitical rivalries in the Gulf and other stresses on the global economy could see the price of oil rise dramatically. “In the short term from the US there will be more supply and there will be less demand and so the price remains bearish. But keeping one eye on all the geopolitical factors, any type of political tension increases the oil price dramatically, like the issues between the US and Iran and Venezuela,” Arya told Rudaw, just days before the attacks on the Saudi oil establishment caused world oil prices to spike. Regarding the declining demand for oil, Arya said: “There are other reasons for that, one clearly, especially the trade impasse between China and the US, but there are also issues between the US and India and all of those issues come together and our view is that will likely impact the global economy. And we forecast that demand is going down simultaneously with a slowdown in the economy.” The state of the global economy hinges to a great extent on America’s trade war with China, Arya said. “In due course the trade war will have to be resolved. For example when President Trump postponed tariffs for two weeks, it was a good gesture.” “The United States and China are the two biggest economies and they have to resolve their issues. And let’s not forget that there is an election in the US and when we go to election no president wants a recession. I think it would be a very important calculation for President Trump that he resolves this issue.” One development market watchers are keeping a keen eye on is the falling demand for fossil fuels in favor of renewables, which will have a big impact on the Middle East’s oil economies. These moves will begin to show in the coming years, Arya said. “Regarding the shifting from fossil fuel to renewable energy, it takes time because so much capital invested in the fossil infrastructure and changing them is time consuming, although renewable energy production has been increased within the last two tree years.” “I am very optimistic that this transition will happen and the oil economies like in the Middle East have enough time to adopt with the new model of energy production.” Interview by Omar Moradi
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