Energy This Week: new Brics, Red Sea missiles, & Kissinger's energy legacy
More Red Sea missiles trigger oil price gain
Further violence in the Red Sea and an improved outlook for Chinese demand bumped up oil prices on the first trading day of 2024, with prices gaining more than $1 by Tuesday afternoon. Yemen's Houthi rebels launched three missiles at a Singapore-flagged container ship, one of which hit it while the other two were shot down by a US destroyer. American helicopters destroyed three attacking boats in one of the most serious incidents since the maritime threat flared up.
Oil prices topped $80 a barrel last Tuesday for the first time in December, amid the continuing attacks on vessels in the Red Sea, but slipped back on Wednesday and Thursday. Overall, prices dropped by 10 per cent in 2023 , their biggest fall since 2020, weighed down by persistent worries over the global economy and demand, as well as stronger-than-expected supply from the US, Iran and Libya.
Brent crude closed on Friday, 2023’s last trading day, at $77.04 a barrel, having started the year at $85.62. Given high inflation, in real terms, prices are even lower, despite geopolitical concerns over supply disruptions and several rounds of cuts by Opec+ adherents.
UAE petrol and diesel prices are down in January by about 5 per cent. But, overall, higher oil and gas prices and production last year led to a $2.4 billion budget surplus in Oman, instead of an expected $3.4 billion deficit. The savings helped to reduce public debt but a deficit is, again, budgeted in 2024.
Kissinger’s energy influence lingers
Former US secretary of state Henry Kissinger, who died in November aged 100, was one of the most notable people who passed away in 2023. His influence on energy geopolitics was profound – in particular, his involvement in the 1973 October War and the subsequent oil shock, and in negotiating the US-China rapprochement that paved the way for Beijing’s dramatic economic rise.
Some of his successors oversaw similar strategic successes but more recent officials have failed to solve growing crises that threaten global economic and energy security.
The inclusion of the UAE, Saudi Arabia and Iran in the Brics group from January 1 brings additional major oil producers to sit alongside existing members Russia and Brazil, as well as leading energy consumers India and China.
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Despite 2023 being a bad year in terms of conflict and record global warming, positive environmental and energy achievements included the Cop28 summit’s agreement on moving away from fossil fuels, the provisions for new low-carbon energy in Washington's massive Inflation Reduction Act, record expansion in renewables and electric vehicles, and lower deforestation in the Amazon.
Nuclear power in, plastic bags out
The UK wants to work more closely with the UAE on nuclear power. Both were among nations attending Cop28 that backed the goal of tripling installed nuclear capacity globally by 2050.
Oil and gas contractor Excel Astra Engineering and Construction Group will set up a $5.4 million factory at the Kezad economic zone in Abu Dhabi. Saudi state mining company Ma’aden announced a major gold discovery in the country’s west.
Gulf nations are embracing rail , with its potential to cut pollution and congestion, and adopting new energy-saving and low-carbon types of technology.
Masdar has now invested a total of $4 billion in Uzbekistan, with 1.4 gigawatts of renewable capacity connected to the grid. On Thurssday, it signed a new agreement to build a two-gigawatt wind farm and more battery storage. And a consortium led by Taqa has won a bid to build a $408 million water reservoir in the Makkah province of Saudi Arabia.
The UAE has banned single-use plastic bags from Monday. Other single-use, non-recyclable plastic items will be prohibited in phases in 2025 and 2026. Eco-friendly options such as paper straws and recyclable shopping bags are gaining popularity – but they are not always as environmentally favourable as marketing suggests.
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Warming world brings trouble for bees
The UAE has embraced mangrove protection at least since the early 1990s, even before the problem of climate change was well understood in the region. The forests help to protect coastlines, trap carbon in the soil and provide a habitat for wildlife. Gulf countries could learn from Europe’s failings to do a better job in protecting biodiversity.
Elsewhere, creatures are struggling as global warming upsets seasons and their normal patterns of activity. Bees in the UAE are yielding less honey because of hot weather. And Tunisia’s lagoons are drying up after six consecutive drought years, chaotic urbanisation and waste dumping. The wetlands are key habitats for migrating birds.