Saudi Arabia’s oil exports have witnessed a sharp decline in the last month. The plunge in exports is the sharpest since the pre pandemic era. It caused by many global market factors but one of the key highlights that can be attributed to the decline in the oil exports in the surge in domestic energy consumption. It is time of high temperature in the Middle East and the Saudi Arabia is no different from it. Due to that, there is high demand for the crude oil or particularly of the energy to keep the houses and offices running. This must be the biggest attributable reason for the surge in the exports in the Gulf country.
The second attributable reason behind the last month plunge in the oil exports is the current global dynamics. How the world economy is run and what are the driving forces behind that contribute in the surge or plunge of any commodity. Due to stiff competitive market at global induced the plunge in shipments of the world’s oil producing country. While it needs are soaring high, due to climatic reasons, the country voluntarily has reduced the percentage of increase in day to day production prices.
What is driving the Plunge in Oil Exports?
In the month June, when the temperature soars high, the country witnessed average temperature around 45 degrees Celsius. This higher temperature is not conducive for human habitation. Households require much bigger needs of energy and have increased consumptions rates in hot summer months. Due to climatic changes and following global warming, the average temperature of the nations is getting higher than it was expected to increase earlier. By the end of 21st century, the average mean temperature of the world will increase by 1.4 degrees Celsius.
It means the glaciers will be melting with much higher pace and the sea levels will be rising with unexpected rates. But the human survival is going simultaneously as they will be having increased needs. And that it one of the driving force behind the plunge in oil exports of the Gulf country. Because the domestic demand for the energy gets higher, and that should be met first, so it induced a short period plunge in the oil exports of the country.
But as of now, it cannot be concluded whether this plunge is going to stay for longer or it is for a short time due to rise in domestic demand. A Bloomberg report states that as of now it is a short time demand because of many factors attributing to it one being the rise in country’s temperature.
How India & China Affecting Energy Sectors?
World’s two most rapidly developing countries are affecting the energy sector and they are playing quite a dynamic role in the plunge in Saudi’s oil exports. Due to ongoing war like situations between Russia and the Ukraine, the world leaders have imposed heavy sanctions on the former soviet country. But Russia being worlds one of the biggest oil producing countries cannot sit back and just see what is happening around. It signed pact with India for selling crude oil at cheaper rates and meeting the needs of both the partner of the energy pact.
But India is one of the biggest markets for the Saudi crude oil and especially energy, its deal with Russia impacted the Gulf country severely. India bought barrels of crude oil from Russia while sidelining Saudi Arabia which has induced the plunge in the oil exports of the country.
But the cheaper imports from Russia are not going to last long as the talks between Russia and the Ukraine are ongoing and both the nations can be pacified soon. It means the world powers will soon be lifting the curbs from Russia and giving it bigger market and competitive rates as well. This will also benefit gulf country as it can leverage by offering competitive rates.
While China is going through an Electric Vehicle revolution, the domestic demand for the EVs in the Chinese market have grown so much that the country is consuming 60% of all the manufactured EVs of the whole world as per the Bloomberg reports for 2023.
And since has stepped up its efforts to build cost effective EVs to make a smoother transitions from black energy to green one, the demand of crude oil and its byproducts might be declining after 2030 as per the Bloomberg reports. There is looming uncertainty over the future of crude oil and nothing with firm conviction can be stated about the energy sectors.
What Recent Trends Say about Oil & Gas Industry?
Whether the global demands for oil will be rising with the same pace benefiting the top most producing countries or not noting can be said with firm conviction. But the global trends are projecting growth for the petroleum sector till 2030 and after that there will be a sharp decline in this field as it is going to be replaced by green energy.
If the global market remains as unstable as it is now, the drastic changes in the energy sector are to be witnessed by all of us. Unpredictably is hovering over therefore drawing farsighted conclusion will be irrational.
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Christi has a unique blend of financial sense and industry knowledge. With a background in international finance and years of experience in delivering economic News around the Globe. Her clear and engaging writing style makes complex financial concepts accessible and informative for our readers.