OPEC-Plus 10 mmbd production cut: Is it sufficient to revive oil prices?

A dilemma caused by OPEC strategic blunder at a wrong time plunged oil prices below $20/bbl, sending tsunami waves across the world. This strategy was formulated to harm US shale oil producers in particular. Notwithstanding, it hurt everyone not sparing anyone irrespective of major oil companies, shale oil producer and national oil companies. However, it causes more financial damage to OPEC members than others as more than 90% of their GDP is associated with oil-based revenues. Though the extent of economic fallout varies from country to country depending upon the cushion of sovereign funds. It may not be a big deal for Saudi because of huge sovereign funds but it severely affected other OPEC members and probably they are not on board to continue with this strategy.    

This strategy may have worked if there was political will, courage, and resources to hold oil prices to $20/bbl or below continuously well over 24 months. It may have helped to achieve their objective but not without harming and putting the whole oil industry permanently on the verge of collapse, including US shale oil. I believe it was wrong timing when the world is already suffering from the effects of COVID-19, but for OPEC this is the perfect timings to achieve their objectives.

A tiny virus that is hard to detect under powerful microscope had a havoc and did not spare any nation – forcing most of the countries to partial or be on a complete lock-down for months. The hardest hit has been in Europe and North America. Both the regions have the capacity to recover from the aftershocks but it may cause permanent damage to most of the developing countries. 

Fever testing facilities, insufficient infrastructure, hospitals, doctors, nurses, masks, protective gears and the required financial resources to deal with this havoc virus. Therefore, they are not sure about how bad it has affected their population and how bad the fallout of this pandemic on their economies is not fully known; it’s too early to tell. It may take longer time to recover from this dilemma. As we are aware most of the energy demand is associated with developing Asia a home of 60% global population, therefore, one could expect a weaker global oil demand at least a year or two or till these economies are fully recovered.

The surplus caused by over producing during the past few weeks than what is required may take many months to clear. No rocket science is required to assess this grim situation caused by COVID-19 and manmade crisis. Most of the countries are partially or in complete lock down and so are most of the industries. Aviation industry is nearing bankruptcies – only fewer flights are operating, only few vehicles are on the road – less oil is consumed. Knowing all these parameters still if one conjecture that global oil demand may have reduced by 10 mmbd is wrong assessment. Therefore, 10 mmbd cut in production is probably a few drops taken out of sea to clear the surplus. A surplus caused by over producing and weaker global oil demand. It means oil prices will remain very low for many months – maybe well into 2021 depending upon the speed of full recovery of global economy from the aftershocks of COVID particularly developing Asia. During the crisis, against global oil demand of 50-6 mmbd if you continue to produce 90 plus mmbd how you are going to clear the surplus! In order to absorb this surplus, it requires more than 10 mmbd production cut at least during the recovery period. If they continue to implement 10 mmbd production cut policy it means lower oil prices stretching over months, if not years. Eventually you are forced to shut down production due to brimming inventories and weaker global oil demand, therefore, think rationally and not wait for the worst possible scenario.

The other possible scenario which is unlikely is that if COVID hits the supply chain - oil production site including refineries and other petrochemical industries – partially halting production and refining operations or manmade crisis that could threatening supply. This may have a devastating impact on oil prices. Such news probably will instantaneously increase oil prices into thirties-forties and if problem persists over many weeks, it will eventually increase to over $50/bbl irrespective of surplus. The higher oil prices at this critical juncture may be good news for dying oil industry that is already on the ventilators but it would be nail in a coffin for developing countries. Higher oil prices probably push recovery period into years from the aftershocks of COVID-19.  If this happen US shale oil once again mushroom and absorbing considerable market share. This means OPEC once again at a square one position despite having gone through marathon unnecessary painful period!

The Energy Landscape set to change – How it affects destiny of oil & coal in 2040?

The global energy landscape is expected to change – led by natural gas and renewables, undermining the role of coal in power generation. While structural changes in auto-industry will have devastating effect on the global oil demand during the next few decades! How will it all affect the destiny of oil and coal industry?

Fossil fuels have been the dominant source of energy for global economic prosperity for over many centuries. Rapid industrialization was exclusively led by coal in the 17^th and 18^th century. In 2018, fossil fuels overwhelmingly account for over 84.7 percent in global total primary energy consumption (TPEC)—but what role will they play in 2040 and beyond? There’s an ongoing debate among various agencies, researchers and academia whether the role of fossil fuels will significantly diminish. If yes by how much?  

The dominance of fossil fuel era

Coal that was responsible for industrialization and remains important source for global economic prosperity for over 250 years. Yet today, it is still a major source of primary energy particularly in power generation. Oil was discovered in the US in 1859, but its demand did not grow until the turn of the century when Henry Ford invented the internal combustion engine (ICE). Thereafter the oil demand continues to penetrate and become an important source of primary energy. It ruled the world over a century along with coal. The expectation was that natural gas will become the next important source and expected to rule the current century, partly because of environmental considerations – mostly displacing coal in power generation. This hadn’t happened as yet. The reasons being partly due to major gas resources are located far from the major consuming countries. Moving gas across continent is expensive and difficult. Even laying pipelines across national boundaries pose constraints due to international politics and regional disputes.

Technological developments way back in 1960s allowed the industry to cool natural gas to -161 C, reducing its size by 600 times. In this way bulk of natural gas was transported through specialized LNG carriers – removing the bottleneck of national boundaries issues. Lately, further technological advancements in horizontal drilling and fracking enabled the industry to tap the unconventional both shale oil and shale gas. The USA has now become a major exporter of LNG and competing with Qatar and Australia.

In 2018 oil (33.6%) and coal (27.2%) remained as major sources of primary energy followed by natural gas (23.8%), nuclear (4.4%) and renewable (10.85% including hydro). But this equation is likely to change within the next 2-3 decades or so. Natural gas industry is expected to flourished and gain top spot within the next two decades however, renewable energy will be competing to gain the first spot as well.

Oil industry is currently passing through self-inflicted turmoil pushing oil prices to be below $20/bbl although it has recovered to around thirty. If the lower oil prices prevails for an extended period of time, would affect the future investments. To sustain and enhance current level of production, industry requires trillions of dollars investment in all three streams – upstream, mid-stream and downstream. Moreover, another challenge for oil industry that cannot be ignored is on-going structural changes in auto-industry. Internal combustion engine (ICE) that once allowed auto-industry to flourish and help oil industry grow enormously. The same auto-industry is now posing challenges to oil industry by shifting from ICEs to electric vehicles (EVs). The penetration of electric vehicles, fuel cells and other LPG/CNG based vehicles surely displaced a sizeable quantity of oil. For simplicity we lumped all these types of vehicles and called them EVs. The rational of this theory is that oil demand soon peaked and then declined. There is absolutely no argument about the peak oil demand. It has to come; the only on-going debate is how soon and when?  Generally, most studies are of the view between 2030-2040. My assessment is that it will happen around 2025. In 2015, Andreas and I forecasted penetration of EVs (autonomous vehicles, less desire to buy cars etc.) and the possible displacement of oil demand. Reference case predicted that EVs will displace around 14 mmbd by 2040 while high case is expected to displace over 38 mmbd. My take is that it will displace somewhere 14 -25 mmbd by 2040, depending upon the speed of EV penetration.

Rational for Renewable taking over coal

Coal is still the second most important source of primary energy accounting for 27.2% end 2018. Thirty-eight percent of global electricity has been associated with coal as compared to 23% by natural gas. Compared to the global share of 38%, China and India account for 66% and 74% of electricity based on coal. While Europe and USA  22% and 27% in 2018 (US down to 23% in 2019). Due to greater share of coal in power generation, China is among the 1^st and India is the 4^th largest carbon emitter.

Penetration of renewable and natural gas is expected to undermine the role of coal, which is expected to reduce due to environmental considerations (Paris climate accord) and public awareness. One may argue why now? Well the realistic answer is that natural gas resources are not uniformly distributed – rather biased in favor of few countries. For example, 38.4% (32% in CIS)[i] gas and 48% of oil reserves are associated with Middle East. While major gas consuming countries are located in North America, Europe and Asia. In some countries there is not ample of environment friendly indigenous resources like natural gas that could challenge and displace polluted coal nor there was public pressure on governments.

That is, availability of resources at a competitive price is the major constraint. As such generally, countries prefer to utilize cheaper indigenous resources even though those causes pollution. For example, in the past major chunk of electricity in the United States was associated with coal-based power plants because of enormous coal reserves. In contrast, more environment friendly natural gas reserves were not enough and therefore, US companies invested globally in LNG business to meet US future domestic gas requirement. The shortage of gas kept Henry Hub prices on the higher side and it was not economically advantageous to substitute with cheaper indigenous coal. However, technological innovations - horizontal drilling and fracking techniques helped oil companies to exploit unconventional resources – trap in the form of shale oil and shale gas. US shale gas boom’s resulted in decline in Henry Hub prices substantially and helped in replacing polluted coal with relatively clean natural gas in power generation. The share of coal in the US power generation dropped from 52.8% in 1997 to 23% in 2019, most of it was captured by natural gas. Natural gas share increased to 38.5% in power generation. Therefore, availability and competitive price of a resource are necessary for substitution.

As more and more natural gas is available in the form of pipe and LNG, significant cost reduction in renewable energy due to technological innovations and environmental reasons both natural gas and renewable energy can penetrate energy market. Both China and India have greater opportunity to improve and reduce share of coal-based power generation by substituting for natural gas and renewable. This strategy will help them to alleviate coal emission and achieve Paris climate targets.  

Efforts in achieving Paris climate goals

Since 2010 the growth in renewable has been phenomenal. For example, during 2010/2019 total renewable capacity increased by 106%, hydropower 27%, wind 244% and solar recorded at 12-fold increase. Figures:1-4 depict the historical trends of regional growth in renewable sources of energy. Asia is most polluted region due to home of 60% of global population and holding 27.5% of coal reserves. In contrast to coal reserves, the regions share in global production and consumption is over 65%. Most of which is being used in power generation. Incidentally, both China and India generate 66% and 74% of electricity respectively from coal-based power plants.

Due to public pressure, agreeing on Paris climate targets, most countries are seriously taking measures in cutting down carbon emission. In addition, the substantial decline in cost of renewables help the countries to take advantage in mitigating the role of coal in power generation. At the end of 2019, both China and India are the major producers of hydro, wind and solar energy in the world. Surely, if such efforts continues, they would be able to reduce the contribution of coal in their energy mix. By the end of 2019, Asia is the leading renewable capacity holder – more than 44% of total renewable capacity, 42% hydropower, 56% wind and 42% solar capacity is associated with Asia. Europe is the second important region followed by North America. Up until 2014 and 2015, Europe was the major producer of both wind and solar energies, however, since 2014 (wind) and 2015 (solar) Asia surpassed the European dominance and became the largest producer of hydro, wind and solar energy Figures-1 to 4)[ii].

Figure-1: Regional Total Renewable Energy – GW (Source: IRENA – 2020 report).

Figure-2: Regional hydro power energy – GW (Source: IRENA – 2020 report)

Figure-3: Regional wind energy – GW (Source: IRENA – 2020 report)

Figure-4: Regional solar energy – GW (Source: IRENA – 2020 report)

Figure-5 depicts comprehensive summary of renewable for top ten countries for each of renewable source of energies. Eighty-three percent of global wind and solar, 70% of total renewable and 68% of hydro associated with given top ten countries. China, USA, France, and India are amongst the top ten in all forms of energy. Common countries associated with Europe – Germany, Italy and Spain. Japan is among the top ten with the exception of wind.

Figure-5: Top ten countries % share in respective renewable sources – IRENA 2019.

Rational of scenarios rather than forecasting

Since future is always difficult to predict especially with many known and unknown factors. Generally, most of them difficult to predict due to element of uncertainty. Therefore, international agencies, such as International Energy Agency (IEA), BP, and others generally prefer to develop a number of scenarios based on different stories of assumptions. For example, regional GDP and population growth, pace of technological advancements in energy & and other sectors, structural changes in auto-industry, the impact of strict environmental regulations. Such as, Paris accord on climate change and many other factors including public outcry as well as perceptions of individuals. The Paris accord and public awareness forces, most polluted countries to devise policies and invest in renewable to cut pollution.  

Primary Energy Mix - Outlook

The role of fossil fuels will decline in the next 22 years from 84.7% in 2018 to average of 70.7% in 2040, but remain the dominant source of primary energy (Table-1). Though it varies from agency to agency and for different scenarios. From high of 76% Exxon to low of 56% BP-RT (rapid-transition) while EIA 68.2%. IEA energy mix under different policy scenario vary from low of 60% sustainable development (SD) and high of 80.8% current policies (CP) scenarios in 2040.

Oil share in global energy mix declined from 33.6% in 2018 to average of all scenarios to 26.8% in 2040. However, Exxon scenario assumes role of oil remains the dominant source of primary energy by 2040 and only marginally declining to 30%[i]. While in BP-RT and IEA-SD scenario, it will decline to 23%. My assessment is that it could shrink from 33.6% in 2018 to around 26% in 2040 or even less. Oil demand is expected to decline to about 75 mmbd in 2040 compared to 99.8 mmbd in 2018. The major decline is associated with road transport sector due to penetration of EVs, increasing ICEs efficiency and preference of using autonomous, uber rather than owning. As such, global oil demand declines somewhere between 75 – 86 mmbd by 2040, depending on speed of EVs penetrations.

The demand for natural gas is expected to increase in petrochemical, power, industries, transport and residential sectors due to its availability and environmental advantage. Moreover, natural gas has the ability to address greenhouse gas emissions and to displace coal in power generation. Gas is also utilized as a backup for intermittent renewables making it an essential resource for more wind and solar development. There have been major gas discoveries in developing countries in Africa and North Africa. Soon it will play an important contribution in domestic sectors of these regions. The role of natural gas expected to increase as more gas is available both in the form of pipe gas and LNG. Surprisingly, most of the underlying scenarios assumes that it will only marginally increase to 26%. According to IEA monthly electricity statistics, natural gas continued to be the leading source of electricity in the OECD, overtaking coal for the first time in 2018. In 2019, electricity produced from natural gas increased by 4.8% and was responsible for 29.0% of the total electricity production. My assessment is that its share will increase to 28% in 2040, as more gas supplies are available in the form of pipe and LNG and more gas discoveries are made in other parts of the world.  

Coal after governing the world over many centuries remains second most important source of primary energy - 27.2% in 2018. Environmental considerations, Paris climate accord, availability of substitutes (natural gas & renewable) its role is expected to plunge considerably by 2040. Its share in all given scenarios declined from 27.2% in 2018 to 20% in 2040. Though there is variation, low of 7% (BP-RT) and high of 25.4% under IEA-CP scenario. Though average of all scenarios is 18.3% in 2040, it will help in meeting agreed Paris climate targets. The major reduction is expected in power generation particularly in China and India – facilitating in mitigating coal-based emission. In 2019, coal-fired generation continued decreasing in most of OECD countries, with a total decrease of 361.4 TWh or 13.4% reducing its share to 22.1% of total electricity mix.  This decrease in coal production was the largest ever recorded, both in absolute and relative terms. The important decrease in OECD Europe highlights European efforts to phase out coal in the electricity mix. Many countries have established strategies to remove coal from their electricity mix by 2030. For example, Germany, the largest coal consumer in Europe, plans to be coal-free by 2038. These strategies include coal-to-natural gas fuel switching. Furthermore, new coal-fired power plant capacity receiving final investment decisions (FIDs) declined by 30% to 22 GW, the lowest level this century. The way renewable capacity in China, India and other parts of the world is exponentially growing it is quite possible the role of coal in primary energy shrink to 18%.

Study by “Statista” predicted that the global share of coal in electricity generation will decline from 35% in 2018 to 23.2% in 2040 while the share of renewable up from 28.2% in 2018 to 45.6% in 2040. This seems to be encouraging assessment and may complement average of all scenarios.   

Table-1: Summary of total primary energy mix scenario[i]

Analyzing the historical growth in renewable and natural gas, one can conjecture that this paradigm shift would be biased and in favor of environment friendly natural gas and renewables. An advantage of renewables is that there is not necessarily a huge upfront capital investment in the transmission system. Solar panels and wind farms can provide electricity to the community without big investments in their transmission systems, especially when populations are scattered in developing countries, thus overcoming the hurdle of transmission cost/constraint. In the past the only constraint was cost of renewable that requires government subsidies. However, due to technological advancements and significant cost reduction these constraints are more or less manageable and have become quite competitive.

Interestingly enough, there is quite of variation in the scenarios of various agencies but all assume that renewable is the future for power generation as it helps in mitigating coal-based emission. The average share of all agencies scenarios is 23.7% by 2040. The lowest contribution of renewable is associated with IEA-current policies where it only grows to 14.7% while BP-RT comes up with 38%. My assessment after analyzing the historical data and its advantages is that its share could increase to well over 23% by 2040.

The growth in nuclear is pretty straight forward though there is variation. Its average of all scenarios stood at 5.9% with low of 4.3% Statista and high of 9.5% IEA-SD. 

i] BP Statistical review of world energy June – 2019.

[ii] IRENA total renewables include – hydropower (including mixed plants, pure pumped storage), marine energy, wind energy (on and offshore), solar (solar photovoltaic (PV), concentrated solar power (CSP), Bioenergy ( solid fuels and renewable waste), Biogas (renewable municipal waste, and other solid biofuels), Liquid biofuels (Biogas), and Geothermal energy. We have only used hydro power, wind and solar energy as these accounts for 76% of total renewable energy. For details see IRENA – 2020 report.

iii] Oil companies may not come up with a scenario for public use where oil share decline substantially by 2040. It could severely affect share value. Though they might be developing alternative strategies as to how to deal with lower future oil demands.

III) Since most of these scenarios are based on last year (IEA 2018), I am pretty sure the new scenarios further tilted in favor of natural gas and renewable due to significant growth in renewable and less FIDs for coal-based power plants.

OPEC Strategic Blunder – Oil Industry is on Ventilators!

By Dr. Salman Ghouri 

OPEC’s strategy in the past has been to maneuver its oil production to bring about market stability. However, the penetration of U.S. shale oil forced them to alter their strategy in favor of market share even at the cost of lower oil prices. Recently, Russia decided not to collaborate with OPEC in cutting oil production. OPEC’s traditional strategy is cutting oil production, but the Saudis decided to utilize their excess capacity to enhance oil production. In this way, Saudis wanted to destabilize the oil market targeting the booming US shale oil industry. The sensitive market reacted immediately resulting in the collapse of WTI to around $31.13/bbl on March 9 from a high of $47.18/bbl on March 3, though prices further dipped to 22.84/bbl by March 18, 2020. The oil prices have fallen further due to COVID-19 which is currently gripping the whole world - weakening global oil demand – causing excessive surplus. One should not forget that a similar strategy was adopted by OPEC in 2014/16, but it was unsuccessful.  At the end of Dec 2019, US shale oil production reached 9.12 mmbd even though the average WTI was hovering in the fifties as compared to 5.11 mmbd in Sept 2016.

Methodology and data

Since the objective of OPEC seems to destabilize the US shale oil industry by means of weaker oil price strategy, we decided to check the sensitivities of US regional shale oil producers. In an effort to explore the possible implications on US shale oil we have used the econometric model and used different possible oil price paths. Three scenarios are used. Firstly, what if oil prices are allowed to gradually increase to Dec 2022 reaching $56/bbl? (Reference case) Second, what if oil prices remain weak over the forecast period below $39/bbl? (Low case) Finally, what if oil prices are allowed to increase reaching $74/bbl by Dec 2022 (High Case)? The objective is to check the possible threshold at which US shale oil production survives/perishes.

We have used monthly data for U.S.’s seven shale regions (Anadarko, Appalachia, Bakken, Eagle Ford, Haynesville, Permian, and Niobrara) from January 2007 to Dec 2019. Figure-1 illustrates the oil price actual average monthly West Texas Intermediary (WTI) data (January 2007 to Feb 2020). Figure-2 depicts WTI forecast prices until December 2022 under alternative scenarios. The oil production for each regain is run against monthly average WTI prices from January 2007 to January 2020.

The historical data reveals that there is lag structure involved with changes in oil prices. When oil prices decreased/increased, the production did not decrease/increase instantly—rather it took a number of months. The timings of response varied from region to regions but generally six to eight months before the full impact is realized. We have run several polynomial distribution lag models (Almon) with various lag structures and (Koyack) model. Each regression is run with and without constants and also used an autoregressive/moving average scheme to correct autocorrelation problems if required. The best estimated model for each region was selected and then re-run to forecast respective regions’ shale oil production under alternative price scenarios.

Shale oil production forecast alternative price scenarios

Figures-2 to 9 depict US regions shale oil production forecast under alternative oil price scenarios. Based on our best estimated models U.S. shale oil production is expected to decline in all the regions in response to plunging oil prices. Generally, US shale oil production revives in almost all the regions once oil price reaches $49-50/bbl range, although Appalachia production only revives when oil prices hit $59/bbl.

When oil prices are allowed to increase, US shale oil production under the reference case is expected to increase after a lag of eight to ten months.  However, response varied from regions to regions. For example, Anadarko, Bakken, Eagle Ford bottomed in November 2020. Permian bottomed in October 2020 while Niobrora bottomed in May 2021. All the regions failed to recover their respective Dec 2019 production levels.  

Summary of Forecast

Table-1 illustrates the summary of US shale oil production forecasts under alternative oil price scenarios. Under the low oil price scenario production declined in all the regions and revived with the gradual increase in oil prices, yet failed to regain their respective Dec 2019 production level. In this scenario oil prices are assumed to remain between $20 and $39/bbl. This strategy could hurt US shale oil production as by Dec 2022 shale production decreased by 1.72 mmbd compared to Dec 2019. Higher oil prices assumed a price range of $20 to maximum of $74/bbl and continues moving upward. Generally, all the regions under high oil price scenario surpass their Dec 2019 production level. Anadarko, and surprisingly the US’s most prolific Permian region, failed to regain Dec 2019 level of production. US total shale oil production increase to 9.56 mmbd in Dec 2022 under high oil price regime compared to 9.12 mmbd in Dec 2019.  

Table-1: Summary of US Regions Shale Oil Production Forecast – alternative oil prices scenarios

Note: the numbers may not round.

Implications on oil industry

No doubt, this strategy will affect US shale oil producers provided OPEC is prepared to maintain lower oil prices within $20 - $39/bb or even in the range of $20 - $54/bbl (Reference) till Dec 2022. If oil prices were allowed to surpass fifty dollars, US shale industry generally would revive successfully. Unlike in the past, this time the US government prepared to shoulder the shale oil industry. In fact, the US government already decided to buy 77 million barrels for strategic petroleum reserves (SPR), a move to insulate US shale oil producers from possible bankruptcies. Therefore, the fallout of continuing to pursue this strategy will be more harmful to OPEC and other oil exporting countries than US shale industry.

Why this Strategy Short Lived?

Saudis are not only losing oil revenues due to lower oil prices but also due to lavish discounts to capture market share.  In addition, to avoid the wide spread of COVID-19 the government has put a ban on Umrah (pilgrimage). It is adversely affecting the hotel/tourism industry. The fallout is quite substantial as economic activities have stagnated. Millions of pilgrims who used to spend millions of dollars every day on goods and services during their stay is lost. Additionally, Saudi government requires a price tag of over $80/bbl to balance its budget has no option but to withdraw huge resources from sovereign funds to keep their economy afloat. The question is how long? Saudis have this liberty but it will have devastating impact on other fellow OPEC members and non-OPEC oil exporters. Most do not have enough resources in sovereign funds and with lower oil prices will have difficulty meeting budgetary requirements. To deal with the COVID-19 pandemic requires enormous resources. How they will survive?  

The analysis concluded that U.S. shale oil industry is insensitive to changes in oil prices in the short-term, but strengthen/weaken in the longer term with the increase/decrease in oil prices. When oil prices increase, shale oil production increases but when it declines it takes number of lags before its impact is fully realized. Under the high case scenario all the regions except Anadarko and Permian generally recover the lost share in production and also surpasses their respective production level of Dec 2019. However, under a persistent lower oil price regime the U.S. shale oil industry loses 23.4% percent of their production as compared to Dec 2019. The question remains whether OPEC will pursue this strategy over a longer term? I doubt that Saudis and OPEC can pursue such a strategy any longer because the oil industry needs trillions of dollars of investment in sustaining and enhancing future oil production. If such strategy continues, it means choking out the much-needed oil industry ventilation and may permanently damage the oil industry. I strongly believe very soon that this strategy will be reversed and market will find its natural way based on demand/supply fundamentals, allowing the oil industry much needed oxygen. Yet this strategy is beneficial for the oil importing countries to deal with COVID-19 and overcome its aftershocks.  

One thing is for sure that current oil price regime provided an opportunity to oil industry (particularly OPEC members) to prepared themselves to live in an environment of oil price between $30-$50/bbl or maybe less! One should not ignore the speedy penetration of electric vehicles (EVs) and its possible fallout on global oil demand that could possibly displaced 38 mmbd by 2040. It is good time to develop strategies to diversify their oil-based economies rather than spending time in market interventions.