The predictions of most of the global institutions are positive GDP growth in 2018. The Organization for Economic Co-operation and Development (OECD) suggest a trend of upward movement. The International Monetary Fund (IMF) suggests “The growth forecast for 2018 is 1. 9 for advanced economies.” It looks to be positive news and will boost confidence. The recent months has seen a little gain in oil prices as NASDAQ shows, meaning oil producing countries would be benefiting in their revenue generation, ostensibly improving their economic conditions. Certainly, when oil prices increase, advanced economies of oil producing nations have more disposable income, and can positively effect job creation to stimulate economic activity through increased consumer spending. For some other economies, that is not necessarily so as illustrated in present Venezuelan experience, as well as some parts of the Middle East. Less advanced oil producing nations who do not produce internally in agriculture, for example, cannot feed themselves, and must remain dependent of the more advanced economies for sustenance, and pay the price. For some 2018 is positive, but it is difficult to predict comfort or prosperity for others.
Factors Impacting Oil & Gas Economies
Increase in Alternatives
There are several alternatives profoundly affecting the global environment today, directly impacting on oil producing economies and growth worth consideration. These substitutes are beginning to make a huge impact on advanced economies, critically reducing costs, benefitting the environment and enhancing people’s lives. Societies are increasing adoption rates, becoming more aware and knowledgeable.
Wind, Solar, Biotechnology
Dubai, an advanced city state, from the oil producing advanced economy of the United Arab Emirates, recently awarded a 3.9 Billion Dollar contract. According to the Associated Press, September 2017, a Consortium of Shanghai Electric and Saudi Arabia’s ACWA Power secured the contract to build and operate a 700 megawatts solar Power plant.In Spain, it is estimated that wind will account for 20% of Energy consumption.The predictions are very positive and according to the Independent, renewable energy projections for the future are raising at almost exponential rates.
Saudi Arabia’s, an oil & gas, advanced economy, push to diversify its economy is instructive. The Globe & Mail Inc., reports Abdullatif Al-Othman, former Saudi Aramco executive as saying ” Oil has been a good source of income, but it’s a depleting Resource. The cyclicality of that resource reinforces our strategy and our commitment to diversifying the economy.”
Oil & gas is a non-renewable, extractive Industry, capable of doing great harm to the environment. It does not offer an economy that is sustainable, and therefore, other sources, or resources must be found. Renewable resources such as wind, solar, wave, or biofuels are imminent substitutes.
Saudi Arabia and Saudi Aramco partnering with a Chinese firm to produce solar energy for another oil rich Middle Eastern country. Even oil recognizes the future.
Additionally, shale oil is also now becoming a factor with new technology coming to the forefront, but there are severe environmental concerns.
The Fourth Industrial Age, The Digital Age or more popularly Industry 4.0, is conjuring up Utopia. All the platforms, tools and opportunities exists for life as we know it to reach a new dimension. The age of Robotics, Artificial Intelligence, Algorithms, Augmented Reality, Cloud Computing, IPv6, 3D Printing is upon us. Countries are investing and creating entire economies, with a huge opportunity for Human Capital Development.
Already we can see the effects of 3D Printing as tissue is actually being made for replacement organs etc. Robots of all types are being developed in a frenzied race involving the advanced economies as they recognize the potential for improving human existence. Driverless cars, drones, and mass communications platforms such as Facebook & WhatsApp, and Uber and AurBnB are models that are transforming business models from capital intensive organizations to innovation intensive, ownerless models.
Online business is the order of the day as costs of ownership become an obsolete model. Facebook advertises to the world with billions of users on its platforms, but people bear the peer to peer cost, such as connectivity and end devices. Similarly with other global platforms such as AirBnB and Uber.
Blockchain takes accountability to a global level since it’s a foundational technology available to all, similar to TCP/IP.
The Global Economy is real-time and online and the pace is blinding. It is very possible for many to be left behind as any thinking or philosophy apposed will only generate ill feelings, especially amongst the young, young adults and post baby-boomer era. Those younger ones demand technological freedom, healthy environments, openness and transparency and it is more than likely they will prevail.
2018 and Beyond
The clash between technology and economics is going to bring changes, some painful to those who are inflexible and steadfast in their ways. In the early days, in Industry 3.0, the then Information Age, people were quite averse to the Personal Computer in the workplace. Folks complained bitterly to IT staff about the computer not working. They simply pulled the plug. But that same generation, PC averse, cannot do without their smartphones now.
The upheavals are likely to be more severe as obsolescence become apparent and real. Loss of jobs and income are real hardships that have been avoided by places like Saudi Arabia, Estonia, Singapore and Dubai. Smaller states, such as island nations of the Caribbean are in for a tough time ahead. Still there are shining examples such as the island of Grenada, who lead the way in developing a diverse economy coupled with prudent leadership.
For 2018, then, economies will suffer as alternatives start to make a bigger impact, thus further suppressing oil prices, which will mean less financial ability to operate at levels accustomed to. Oil rich economies spur consumer spending internally, which affect global environments who provide goods and services to these consumer spending economies. As oil prices remain low, and are likely to remain at that level, countries such as Saudi Arabia are adjusting while they still have substantial amounts to invest in a diversified, sustainable economy. Places like Venezuela are not so fortunate.
Concurrent with these shifts in technology, is the fact of increasing uncertainty. The United States of America is experiencing serious challenges to its executive as there are investigations pending and ongoing concerning the President, alongside increasing uneasiness with North Korea. Problems with Russia are also surfacing as a result of continuing examination of the machinations of the last Presidential Elections. Uncertainty can have a debilitating effect on trust based systems such as global financial markets and traditional banking. The meteoric rise of crypto currency Bitcoin, trading at past $16000.00 today December 7th 2017 can also be a source of concern, fueled by uncertainty and lack of trust.
In 2018, the challenge is to be able to recognize those imminent changes on the horizon, think, plan and execute strategically, whilst exercising caution. As the Saudis have done!