Oil faces a vast array of challenges in a rapidly evolving world

However, the United States is one of the biggest oil importers, and despite the decrease in the number of imports, it is still important and estimated at 6.1 million bpd, while the total consumption was in the range of 18.7 million bpd in 2021.

China's comeback and market recovery

Oil economies have become dependent on Asian countries that have enjoyed remarkable economic growth in recent years, most notably China, India, and Japan. In recent years, China has become the most influential country in oil markets and in oil supply and demand. But China's crude oil imports fell 16% in April to 10.4mn bpd, from 12.4mn bpd in March.

China imports oil from a number of producing countries, most notably Saudi Arabia and Russia. The import rate is estimated to be in the range of 11.8mn bpd, which is a significant bump compared to the past two years, as the country suffered from closures and restrictions due to fears of the Covid-19 epidemic and didn't reopen until a few months ago.

There's no doubt that the recovery of the Chinese economy is of great importance to the oil market – it boosts demand and raises prices.

The big question is how the OPEC countries, specifically oil-producing Arab countries, will deal with short and long-term market fluctuations, in light of recent factors and variables, including climate change, wars, and natural disasters.

The increasing availability of clean energy alternatives and transformations in the manufacture of vehicles and electricity-generated fuel to combat climate change and reduce carbon dioxide emissions also pose a challenge.

Russia's war in Ukraine since February 2022 has been affecting the oil market and has, for some time, pushed up prices after the United States and European countries boycotted Russian oil and natural gas exports. 

OPEC countries faced crises in the past, the most important of which was the decline in oil prices in the mid-1980s, which prompted them to reduce production from about 30 million bpd to 16 million bpd after the price fell to less than $10 per barrel. This was the case in the late 1990s following the financial crisis in East Asian countries. 

Dependence on oil for power generation for various uses may be around 33% at present, but how long will it be maintained in the years and decades to come?

Call for adaptation

The challenge for Gulf and other oil and natural gas producers is to be able to adapt to the variables of energy economics while, at the same time, developing their economies to be more diversified and reduce the contribution of the oil and gas sector to the GDP.

Capacities may vary among producing countries, as Saudi Arabia and the United Arab Emirates have been able to boost non-oil sectors, as part of efforts to reduce domestic oil consumption and develop alternative energy projects.

Other producing countries should make similar efforts to diversify their economic base, deal with the new world requirements, rehash old projects to free oil from carbon dioxide to export clean oil and promote human development in order to promote the transition to knowledge economies.