China’s economic growth, rampant over the past decade, is slowing. Middle Eastern energy and petrochemicals exporters should take note and start looking for the next big thing.
As the global economy more or less ground to a halt in 2008 and 2009, the price of oil, the Middle East’s biggest single export and the fulcrum of the regional economy, plummeted.
The fact that the US benchmark oil contract, West Texas Intermediate, fell from just over $147 a barrel to less than $40 a barrel between June 2008 and February 2009, bears repeating. MEED calculated at the time that overall daily income for Middle East Opec members fell by two thirds to $1bn as a result of falling prices and output cuts. Almost three years on, the situation could not be more different.
Opec’s overall income in 2011 may have topped $900bn after a year in which the European benchmark crude contract Brent, averaged a record $111 a barrel. Saudi Arabia alone made more than $290bn from oil exports last year.
The high 2011 price can be attributed in large part to the Libyan civil war. Analysts continue to predict a $100 a barrel oil price for 2012 on the back of tensions between the US and Iran that look set to rumble throughout the year.
These are supply-side concerns. Underpinning global demand was China, which imported as much as 10 million barrels of oil a day, equal to Saudi Arabia’s output.
China’s economy will slow in 2012, and, while the country will remain a major importer of oil and gas, it will also focus on boosting domestic production of refined oil products and petrochemicals, major exports from the Middle East.
Regional producers can still count on Chinese oil demand, but should start looking to other economies like India, to meet their growing gasoline and petrochemicals output.