Major oil and gas exporters have weathered many upheavals in recent decades but a renewed commitment to reform and economic diversification will be vital to cope with the changing dynamics of global energy. These include rising production from new sources such as shale, uncertainties over the pace of oil demand growth and deployment of new energy technologies, according to a new report from the International Energy Agency.
The analysis, the Outlook for Producer Economies – a special report in the World Energy Outlook series – examined six resource-dependent economies that are pillars of global energy supply: Iraq, Nigeria, Russia, Saudi Arabia, United Arab Emirates and Venezuela. It assessed how they might fare to 2040 under a variety of price and policy scenarios.
The rollercoaster in oil prices over the last decade has brought into sharp relief the structural weaknesses in many of the major exporters. Since 2014, the net income available from oil and gas has fallen by between 40% (in the case of Iraq) and 70% (in the case of Venezuela), with wide-ranging consequences for economic performance.
The volatility of hydrocarbon revenues presents dilemmas for countries whose budgets depend on them, especially if their economies and finances are not resilient. The extent to which producer countries steer through essential economic transformation can have major implications for energy markets, global environmental goals, and energy security, according to the report.
The new report comes at a time of high oil prices, which are a double-edged sword. Higher revenues provide the means to reform, but they can also appear to reduce its urgency. However, as was seen in the past, higher energy prices encourage production elsewhere while accelerating structural changes in demand, which affect the producers’ long-term markets.
“More than at any other point in recent history, fundamental changes to the development model of resource-rich countries look unavoidable,” said Dr Fatih Birol, the IEA’s executive director. “Following through with the announced reform initiatives is essential, as failure to take adequate action would compound future risks for producer economies as well as for global markets.”
The countries examined are very diverse, and the report considers a wide range of experiences and prospects. Many of them have pushed forward plans to boost investment and growth in the non-oil sectors of their economics. Venezuela, though, provides an example of how badly things can turn out when economic and energy headwinds gather strength.
Some of the world’s largest producers face strong pressures from rising numbers of young people entering the workforce. More than 50 percent of the population living across the Middle East is under the age of 30; the proportion is more than 70% in Nigeria. In many major producers, income from oil and gas will not be large enough to provide for these growing populations, even in scenarios where oil demand continues to grow to 2040 and prices remain relatively robust.
The energy sector has an important part to play in the reform agenda. This report focuses on six key responses: capturing more domestic value from hydrocarbons, for example via petrochemicals; using natural gas as a means to support diversified growth; harnessing the large but under-utilised potential for renewable energy, especially solar; phasing out subsidies that encourage wasteful consumption; ensuring sufficient investment in the upstream (the ability to maintain oil and gas revenues at reasonable levels is vital for economic stability); and playing a role in deploying new energy technologies, such as carbon capture, utilisation and storage.
“The reform process should be much wider than energy; but it relies on a well-functioning energy sector, said Dr Birol. “Successful reform programs can open a broader range of strategic options for producers, as well as new opportunities for engagement on a range of energy issues. There is a lot at stake.”
Wide Variations in Post-COVID ‘Return to Normal’ Expectations
A new IPSOS/World Economic Forum survey found that almost 60% expect a return to pre-COVID normal within the next 12 months. including 6% who think this is already the case, 9% who think it will take no more than three months, 13% four to six months, and 32% seven to 12 months (the median time). About one in five think it will take more than three years (10%) or that it will never happen (8%).
Views on when to expect a return to normal vary widely across countries: Over 70% of adults in Saudi Arabia, Russia, India, and mainland China are confident their life will return to pre-COVID normal within a year. In contrast, 80% in Japan and more than half in France, Italy, South Korea, and Spain expect it will take longer.
At a global level, expectations about how long it will take before one’s life can return to its pre-COVID normal and how long it will take for the pandemic to be contained are nearly identical. These findings suggest that people across the world consider that being able to return to “normal” life is entirely dependent on containing the pandemic.
An average of 45% of adults globally say their mental and emotional health has gotten worse since the beginning of the pandemic about a year ago. However, one in four say their mental health has improved since the beginning of the year (23%), about as many that say it has worsened (27%).
How long before coronavirus pandemic is contained?
Similar to life returning to pre-COVID normal, 58% on average across all countries and markets surveyed expect the pandemic to be contained within the next year, including 13% who think this is already the case or will happen within 3 months, 13% between four and six months and 32% between seven and 12 months (the median time in most markets).
Majorities in India, China, and Saudi Arabia think the pandemic is already contained or will be within the next 6 months. In contrast, four in five in Japan and more than half in Australia, France, Poland, Spain, and Sweden expect it will take more than a year.
Change in emotional and mental health since beginning of the pandemic about a year ago
On average across the 30 countries and markets surveyed, 45% of adults say their emotional and mental health has gotten worse since the beginning of the pandemic about a year ago, three times the proportion of adults who say it has improved (16%)
In 11 countries, at least half report a decline in their emotional and mental health with Turkey (61%), Chile (56%), and Hungary (56%) showing the largest proportions.
African fisheries need reforms to boost resilience after Covid-19
The African fisheries sector could benefit substantially from proper infrastructure and support services, which are generally lacking. The sector currently grapples with fragile value chains and marketing, weak management institutions and serious issues relating to the governance of fisheries resources.
These were the findings of a study that the African Natural Resources Centre conducted from March to May 2020. The centre is a non-lending department of the African Development Bank. The study focused on the impact of the Covid-19 pandemic in four countries – Morocco, Mauritania, Senegal and Seychelles. The countries’ economies depend heavily on marine fisheries. The fisheries sector is also a very large source of economic activity elsewhere in Africa. It provides millions of jobs all over the continent.
The study dwells on appropriate and timely measures that the four countries have taken to avoid severe supply disruptions, save thousands of jobs and maintain governance transparency amid the ongoing global uncertainty and crisis.
Infrastructure shortcomings include landing facilities, storage and processing capacity, social and sanitary equipment, water and power, ice production, and roads to access markets.
Based on the findings, researchers made recommendations to strengthen the resilience of Africa’s fisheries sector in the context of a prolonged crisis, and looking ahead to a post-Covid-19 recovery.
The report strongly advocates for:
– Increased acknowledgment of the essential role of marine fisheries stakeholders and the right of artisanal fishermen to access financial and material resources.
– Strengthening the collection of gender-disaggregated statistical data in a sector that employs a vast number of women and youth.
– Establishing infrastructure and support services at landing and processing sites of fishery products, with priority access to water.
– Investing in human capital to ensure high-level skills in the different areas of fisheries management.
– Improving governance frameworks by encouraging the private sector and civil society to participate in formulating sectoral policies and resource management measures.
The study recommends urgent reforms to make marine fisheries more resilient and enable the sector to contribute sustainably to the wealth of the continent’s coastal countries.
Marine fisheries are a crucial contributor to food security and quality of life in Africa. Good nutrition is a key factor to quality of life, and the marine fisheries sector supports the nutrition of more than 300 million people, the majority of whom are children, youth and women. It also provides more than 10 million direct and indirect jobs.
Dominated by artisanal fishing and traditional value chains, the fisheries sector in Africa is mainly informal and is rarely considered in public policies or in assessing the wealth of countries.
Like other sectors, the African fisheries sector has been severely hit by the Covid-19 pandemic. Covid has affected supply markets and regional trade. This has resulted in substantial economic losses for most households that depend on fisheries.
Top Trends Impacting Global Economy, Society and Technology
The new technologies of the Fourth Industrial Revolution, such as artificial intelligence (AI), the cloud and robotics, are changing the way we live, learn and do business at a rate unprecedented in human history. This seismic shift is playing out in a world characterized by unreliable political landscapes and increasing environmental instability.
Scenario planning in this environment can be very difficult for businesses, affecting their ability to plan for the future, and properly assess the risks and opportunities that may present themselves. The Technology Futures report, released in collaboration with Deloitte, provides leaders with data analysis tools to scenario plan and forecast future technology trends.
“The rapid pace of technological change, alongside the global crisis caused by COVID-19, means that leaders today need new tools to understand challenges and develop strategies in the face of an increasingly uncertain future. This report provides three new analytical tools for business leaders to think about the future in a dynamic environment,” said Ruth Hickin, Strategy and Impact Lead, Centre for the Fourth Industrial Revolution, World Economic Forum.
“We are delighted to collaborate with the World Economic Forum to take a disciplined look into the future, particularly as we emerge from a world-altering event, like COVID-19,” said Mike Bechtel, Managing Director and Chief Futurist, US Consulting, Deloitte, and lead author of the report. “We hope that by providing a clearer picture of how today’s nascent technologies will impact our future, we can play a meaningful part in driving innovation, collaboration and economic growth that improves life for all people.”
The report breaks down future trends into four categories for business leaders and provides some examples of what is likely to remain constant in the years ahead.
- Information: With the volume of accessible data exploding and more of our personal lives lived online, the report projects the probable implications for remote learning, remote working and healthcare.
- Locality: Since the onset of COVID-19, even more of our interpersonal interaction is virtual and physical experiences have dwindled. The report projects more niche, readily available virtual experiences available to consumers.
- Economy: The report forecasts a growing likelihood that flexible and clean energy production will continue rising.
- Education: Personalized education will likely grow, along with the availability of digitized and virtualized content.
In addition to strategic modelling, the report gives leaders a baseline history of how the Fourth Industrial Revolution has progressed. It highlights just how fast technology is evolving and outlines one way risk management could evolve to better address and adapt to it.
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