RIYADH, Sept 30: Crude markets have received severe battering -– of almost unprecedented magnitude -– having lost almost 25 per cent since July before rising somewhat, underlining the fact that crude business is both volatile and slippery. It is for this reason that the task of forecasting and projecting in the industry is still more impossible and fraught with dangers. As the geo-political situation improved, markets didn’t take long to get rid of the ‘fear factor’ from the prices. Market fundamentals appear back in control -– at least for the time being -- first in many, many months.

And if one looks at the market fundamentals, they don’t appear to be too threatening. Markets are surely not completely out of woods. Security remains a major issue and security is two ways. If the consumers are continuing to clamour for security of supplies, producers are also insisting on demand security as vital -- to keep pace with the burgeoning global requirements. And indeed they have reasons for that. To keep the markets well supplied, balanced and stable, security is of paramount importance -– both ways.

It was the Saudi Oil Minister, Ali Al-Naimi, who first highlighted the importance of demand security, while addressing a meeting of energy ministers and senior officials from all across the globe in Riyadh, at a conference held under the auspices of the International Energy Forum. Conceding the importance of supply security to the consumers, he raised the question of demand security too, as a vital component of the overall global energy balance.

Now other major energy suppliers are also raising the issue vocally. Russia, which overtook Saudi Arabia as the largest global crude producer in the last few months, is also now vocal about the impact of all the debate about cutting down the global dependence on fossil fuel.

While taking questions from an international group of Russia-watchers, mostly academics, over an elaborate lunch at his official residence near Moscow, earlier the month, President Putin said Moscow wanted long–term (energy) contracts. Just as suppliers had to pledge continuity for the long-term, “so that customers should also not be able to turn around and say ‘We don’t need it now’. Security works both ways. We need assurances, too,” Mr Putin argued, rather forcefully and indeed with logic.

Oil is a costly business. Things need to be planned in advance. The gestation period for any energy related project is long. Hence signals that discourage investors from making rights investments at the right place and at the right time could have detrimental and disastrous consequences for the industry and hence the world, one has to underwrite.

And when the Saudi oil minister says that attempts to curb energy use may have an economic impact that could damage the world’s energy future, he is absolutely on target. “While the world does need continued improvement in energy efficiency, some government policies that aim to curb demand artificially and in the process create demand uncertainties would have economic ramifications that could jeopardise the global energy future,” Mr Naimi argues.The process of bringing new energy resources on stream is both time and capital consuming. There is an almost consensus within the industry that, despite all that is being said, fossil fuel would continue to be the most preferred energy option for many more decades to come. Most of the studies and reports almost concur with the fact that against all wishes and desires the global dependence on crude and hence this region would continue to grow in absolute terms in the decades to come.

The Energy Information Administration (EIA), the statistical arm of the US Department of Energy, projects the global crude consumption to soar by 37 per cent from the current 86 million bpd to almost 118 million bpd by 2030. And the EIA concedes that Opec will provide a large chunk of the additional oil supplies that will be needed to meet the global demand in 2030.

According to the International Energy Agency (IEA), the OECD energy watchdog, the global energy consumption could go up by over 50 per cent between now and 2030. The IEA, however, insists that though the world has enough resources to meet the surge in demand, investment of a whooping $17 trillion will be needed to bring these resources to consumers.

According to the IEA, the Middle East and the North African region would still be the major energy provider to the world in 2030. From current approximately 29 million bpd, the supplies from the region would go up to 50.5 million bpd, as more than 60 per cent of the proven oil reserves are in this region, IEA chief economist Dr Fatih Birol argues.