Oil-producing nations located in the Middle East and North Africa are struggling with their economies, most of which are not diversified enough to offset the losses caused by falls in the price of crude.
A quick check shows that the current price of a barrel of crude oil – which is about 160 litres – is just above $40, which is significantly lower than certainly Arab countries need it to be.
According to the Economist, Algeria needs the price to be about $157 a barrel, while Oman wants to get to at least $87.
And it’s not actually the coronavirus pandemic that has caused the fall in the oil price, though it has certainly contributed to the downward trend in recent months.
The International Monetary Fund calculates that the oil revenues of the Middle East and north Africa from $1 trillion in 2012 to $575 billion in 2019.
This looks to a long-term trend which will continue because consumers are rejecting what they see as dirty fossil fuels which pollute the atmosphere.
For example, they are opting for new products such as electric vehicles instead of petrol cars – crude oil is refined to make petrol.
Electric vehicles still represent less than 5 percent of the total vehicles on the road, according to Statista, but an increasing number of consumers and industrial customers are buying electric cars, which suggests that petrol vehicles and their combustion engines are basically on the way out.
Indeed, such is the rate of growth that Deloitte, the world’s largest management consultancy, has revised its forecast for the electric vehicle market.
Deloitte has previously expected sales of electric vehicles to total around 20 million a year by 2030. Now, it says that figure will be more than 30 million.
Perhaps a more significant finding by Deloitte is that 50 per cent the 1,500 or so drivers the company questioned said they would consider buying an electric vehicle as their next purchase.
This signifies a fundamental shift in the attitudes of the public, who have never before been offered or interested in electric vehicles.
Automakers in China, which has been the world’s largest automotive market for quite some years, sold more than 2 million electric cars a month between April and June 2020, after a fall to less than 500,000 in February due to the coronavirus outbreak.
While oil-producing nations and their refining partners will continue to be the biggest of big businesses for some time yet, it’s looking like the automotive market will be less and less important a buyer going forward.
Another interesting point is that the US has recently increased its oil production, overtaking Saudi Arabia to become number one, according to some researchers. This may mean that the oil industry has a powerful and influential nation which may create a natural resistance to the consumer and societal move toward electric vehicles.
The growing demand for electric vehicles is causing established automakers to invest billions of dollars in establishing new, more appropriate manufacturing systems. It’s also creating entirely new electric vehicle makers to emerge, many of them in China.
According to the Deloitte report, the growth in the number of original equipment manufacturers in the electric vehicle market cannot last and many will not survive.
Mike Woodward, Deloitte’s North West Europe automotive leader, writes in the report: “With a substantial increase in the level of EV production expected over the next decade, the number of potential manufacturers appears genuinely unsustainable.
“If, as expected, supply significantly outstrips demand then something will have to give. Our expectation is that the market will find a way to normalise itself at the expense of the manufacturers.”