Ali al Naimi, centre, the minister of petroleum for Saudi Arabia, says oil will keep its grip on the world economy for another 30 to 50 years. Hassan Ammar / AP Photo
Ali al Naimi, centre, the minister of petroleum for Saudi Arabia, says oil will keep its grip on the world economy for another 30 to 50 years. Hassan Ammar / AP Photo

A new era faces OPEC



A few dozen dedicated followers heeded Saudi Arabia's call to attend a Golden Jubilee celebration for OPEC in the marble-clad hall of the InterContinental Hotel in Riyadh - but even they appeared to be more absorbed by their BlackBerrys than what was being said.

The kingdom's minister of petroleum pronounced that oil would keep its grip on the world economy "whether we like it or not" for another 30 to 50 years but the sparse audience seemed to say otherwise.

"I think the oil era is probably over," says Ivan Sandrea, the vice president of exploration and production strategy for the Norwegian state oil company Statoil. "Oil is still very important but the world is growing based on other things."

Ample supplies of cheap fuel was a big factor in the unprecedented growth in the economies of the US and Europe during the 20th century. When supply was disrupted, as it was during the Arab oil embargo of 1973 and the Iranian revolution six years later, oil's impact left deep scars on consumers in the West, who endured shortages at petrol stations, rocketing inflation and job losses in the recession that followed.

But global growth today has shifted away from natural resources to services and technology. The emerging economies of the 21st century, such as China and India, pay top dollar for energy. Rather than cheap fuel, their stimulus is cheap labour and technology.

The oil economy has shrunk dramatically as a proportion of global GDP and even at $80 a barrel, a barrel of oil is still cheaper than the same amount of mineral water. OPEC ministers have been relegated to bystanders at world economic events.

Nowhere has this been more evident than in the global downturn, when oil was relegated to a bit part in the financial crisis and subsequent collapse in global growth.

Turmoil in financial markets drove oil prices to a record high of $147 a barrel in July 2008, only to plummet to $30 nine months later, forcing OPEC to make its largest ever cut in output.

Today, even if oil prices were to double in the wake of a supply shock, the IMF predicts global growth would fall 1.4 per cent at worst, while world inflation would rise by 1.5 per cent.

Some OPEC nations, too, are weaning themselves off oil dependence. Saudi Arabia, for decades solely a producer of oil, now has an industrial base that makes up 10 per cent of its economy.

Its non-oil sector is growing at 5 per cent and rising, offering the hope of careers to the millions of youths entering the job market. Its property market is buoyant and investors from luxury retailers to video animators are seeking to cash in on its emerging consumers.

The UAE is even further down the industrialisation route, with 16 per cent of the economy made up by non-oil industry.

While one half of the world remains transfixed by the fear of oil running out, oil exporters are much more concerned that demand for their natural resources may begin to fade.

Iraq, for decades unable to exploit its oil wealth due to sanctions during Saddam Hussein's reign, is on the cusp of a challenge to Saudi Arabia as the world's top producer.

The rate of growth in global oil reserves has slowed but consumer behaviour is also changing. Climate change is turning consumers away from hydrocarbons and China is just the latest superpower to pump billions of dollars into the search for an alternative to the combustion engine, which is the linchpin of oil's pre-eminence among transport fuels.

Technology is also playing a role in increasing supply. The industry currently extracts only about half the oil in a typical field and new techniques to lift this rate of recovery are unlocking huge new reserves from previously abandoned fields.

"We are experiencing a long-term transition in supply dynamics from easy oil to many energy sources that are complex, so the rate of growth in oil production over the next century will not be the same as the last century - but the resources to underpin the next century are there," says Mr Sandrea.

After the gyrations of the past 18 months, oil prices appear to have settled in the $70 to $80 a barrel range, far below the $200 price foreseen by Matthew Simmons, the oil financier and "peak oil theorist" who made a name for himself two years ago by predicting Saudi oil output would collapse.

The questions for economies of the Gulf that depend on oil revenues are: At what price will oil leave the stage and what is the optimal rate of reserves depletion?

King Abdullah of Saudi Arabia has said $75 a barrel is a fair price and the market has given it to him, for now. But Mr Sandrea says the private sector, which still pumps more than half of the world's oil, needs something closer to $50.

"Demand for oil will increase until the price chokes it off," says Bill Farren-Price, an independent oil analyst. "The price will deliver an alternative through a technological breakthrough. The Saudis need $75 but that might be too high."

The stewards of the world's oil reserves in the Gulf would never want to be accused of selling the family silver too cheaply, but neither do they want their successors to be left holding billions of barrels of oil they cannot sell.

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COMPANY PROFILE

Company name: Happy Tenant

Started: January 2019

Co-founders: Joe Moufarrej and Umar Rana

Based: Dubai

Sector: Technology, real-estate

Initial investment: Dh2.5 million

Investors: Self-funded

Total customers: 4,000

How to protect yourself when air quality drops

Install an air filter in your home.

Close your windows and turn on the AC.

Shower or bath after being outside.

Wear a face mask.

Stay indoors when conditions are particularly poor.

If driving, turn your engine off when stationary.

Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
 
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
 
Round 3: February 7-9, Dubai Autodrome – Dubai
 
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
 
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
UPI facts

More than 2.2 million Indian tourists arrived in UAE in 2023
More than 3.5 million Indians reside in UAE
Indian tourists can make purchases in UAE using rupee accounts in India through QR-code-based UPI real-time payment systems
Indian residents in UAE can use their non-resident NRO and NRE accounts held in Indian banks linked to a UAE mobile number for UPI transactions

COMPANY PROFILE
Name: Almnssa
Started: August 2020
Founder: Areej Selmi
Based: Gaza
Sectors: Internet, e-commerce
Investments: Grants/private funding
How to wear a kandura

Dos

  • Wear the right fabric for the right season and occasion 
  • Always ask for the dress code if you don’t know
  • Wear a white kandura, white ghutra / shemagh (headwear) and black shoes for work 
  • Wear 100 per cent cotton under the kandura as most fabrics are polyester

Don’ts 

  • Wear hamdania for work, always wear a ghutra and agal 
  • Buy a kandura only based on how it feels; ask questions about the fabric and understand what you are buying
If you go
Where to stay: Courtyard by Marriott Titusville Kennedy Space Centre has unparalleled views of the Indian River. Alligators can be spotted from hotel room balconies, as can several rocket launch sites. The hotel also boasts cool space-themed decor.

When to go: Florida is best experienced during the winter months, from November to May, before the humidity kicks in.

How to get there: Emirates currently flies from Dubai to Orlando five times a week.
Anxiety and work stress major factors

Anxiety, work stress and social isolation are all factors in the recogised rise in mental health problems.

A study UAE Ministry of Health researchers published in the summer also cited struggles with weight and illnesses as major contributors.

Its authors analysed a dozen separate UAE studies between 2007 and 2017. Prevalence was often higher in university students, women and in people on low incomes.

One showed 28 per cent of female students at a Dubai university reported symptoms linked to depression. Another in Al Ain found 22.2 per cent of students had depressive symptoms - five times the global average.

It said the country has made strides to address mental health problems but said: “Our review highlights the overall prevalence of depressive symptoms and depression, which may long have been overlooked."

Prof Samir Al Adawi, of the department of behavioural medicine at Sultan Qaboos University in Oman, who was not involved in the study but is a recognised expert in the Gulf, said how mental health is discussed varies significantly between cultures and nationalities.

“The problem we have in the Gulf is the cross-cultural differences and how people articulate emotional distress," said Prof Al Adawi. 

“Someone will say that I have physical complaints rather than emotional complaints. This is the major problem with any discussion around depression."

Daniel Bardsley