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An oil hurricane in the making

“The recent turmoil in oil markets is not an aberration; it is a glimpse of the future. The world has entered an era of low prices and no region will be more affected than the Middle East and north Africa”, writes the Economist. It will have major implications for the rest of the region (remittances for some countries are worth over 10% of their GDP, tourists don’t travel in the region anymore) and, the more sovereign wealth funds are drained, the global economy and its stock exchanges will be hit hard as well. With declining oil revenues ($1trn in ’12 to $575bn in ’19), government deficits skyrocket (estimate for Saudi-Arabia alone is over $110bn for 2020). Rapidly declining incomes will translate into social unrest in countries, as is already visible in Lebanon, Algeria and Egypt.

Current and future pain in the region, highlighted and reinforced by the Covid-19 pandemic, will have severe, far-reaching consequences. The general direction is pretty clear, how fast it will happen, what possible implications may be and how to prepare for it, has to be the topic of some serious scenario thinking. To what extent will it, for example, accelerate the growth of renewable energy and what are the consequences for global oil flows in the short term?


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