Diversification vital for Bahrain ‘to ensure continuous growth’

Bahrain and its oil-producing GCC peers could face a sizable challenge due to the rapidly growing alternate energy industry in less than ten years, according to a renowned economist.

The Gulf’s diversification efforts become even more vital when the forecasted growth of the alternative energy sector is considered, according to Economist Mark Matthews who is the Head of Research Asia at Julius Baer.

In an interview with Tribune, Matthews explained that while the reform process undertaken by the GCC countries is encouraging, the region will have to be prepared to overcome more challenges. According to him, the technological advancements in the shale oil industry have plateaued at the moment and pose a smaller threat to the conventional oil industry when compared to the threat posed by alternate energy sector.

Interview excerpts:

The oil price saw a supply glut and a crash at the tail end of last year. Is the outlook on oil prices more favorable now?

One of the reasons for the crash last year was the waivers given by the Trump administration to a number of countries to import oil from Iran despite imposing sanctions on Iran. The Americans surpassed Saudi to become the world’s largest producer but that is mostly with shale oil and that’s why I’m optimistic because the break-even rates for the new Shale wells in the US are between $47 and $55 on average, depending on the basin.

So most of these new Shale wells won’t breakeven on low oil prices. It’s also very political, in a nutshell Republicans in the United States who tend to drive big SUVs that are gas guzzlers, also live in the flyover States where they need to drive long distances. This is why Trump is very sensitive about the oil price because he knows that Republicans don’t like a high oil price.

The Democrats who live on the coast, tend to live in cities. So maybe they take the subway or the bus where they’re more environmentally conscious so they may drive a hybrid car. It will be interesting to see what happens to the oil prices if the Democrats win the coming elections.