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Oil Prices Expected to Rise in the Second Half of 2023, says International Energy Forum
Supply Struggling to Meet Demand
According to Joseph McMonigle, Secretary General of the International Energy Forum, oil prices are expected to increase in the second half of 2023 due to supply struggling to meet demand. While oil demand has quickly bounced back to pre-Covid levels, supply is having a tougher time catching up. The fear of a looming recession is currently moderating prices, but McMonigle predicts that supply issues will become more serious in the second half of the year, leading to an increase in prices.
Increasing Demand from China and India
McMonigle attributes the push in oil prices to increasing demand from China and India. He states that India and China combined will make up 2 million barrels a day of demand pick-up in the second half of this year. With these two countries being the largest importers of crude oil, their increasing demand is expected to further drive up oil prices. McMonigle notes that prices are already at $80 per barrel and could potentially go even higher.
OPEC+ Expected to Take Action
While there may be concerns about a potential supply-demand imbalance, McMonigle is confident that OPEC+ will take action and increase supply if necessary. He believes that they are being cautious and want to see evidence of demand picking up before making any changes. However, if a significant imbalance occurs, McMonigle expects OPEC+ to respond accordingly.
Focus on Energy Security and Transition
McMonigle also discusses the liquefied natural gas (LNG) market, highlighting the stability in Europe's energy market due to a warmer-than-expected winter in 2022. He warns that future winters could be more challenging and emphasizes the need for global policymakers to invest in renewable energy to ensure energy security. McMonigle stresses the importance of closely monitoring prices and volatility in energy markets to maintain public support for climate policies and the energy transition.
Conclusion: Implications for New Businesses in the Face of Rising Oil Prices
The forecasted rise in oil prices in the second half of 2023, as indicated by the International Energy Forum, holds important implications for new businesses. As supply struggles to meet demand, businesses operating in industries reliant on oil or affected by its prices must brace themselves for potential challenges and opportunities.
Challenges
1. Increased Operational Costs: Rising oil prices can result in higher production costs for businesses that heavily rely on oil, such as transportation, logistics, and manufacturing sectors. This may squeeze profit margins and require careful budgeting and cost management.
2. Competitive Pressure: Industries that rely heavily on oil inputs might witness intensified competition as businesses try to offset increasing costs. Small startups may find it challenging to compete with larger established firms that have greater resources to absorb price fluctuations.
Opportunities
1. Alternative Energy Solutions: The anticipated rise in oil prices further emphasizes the need for alternative energy sources. Startups that focus on renewable energy, such as solar, wind, or clean technology solutions, may find increased demand and support from consumers and governments alike.
2. Energy Efficiency Innovations: New businesses that specialize in energy-efficient technologies, such as smart grid solutions, energy management systems, or electric vehicle infrastructure, stand to benefit from the growing emphasis on energy conservation and sustainability.
Adaptation Strategies
To navigate the impact of rising oil prices, new businesses should consider the following strategies:
1. Diversification: If feasible, diversify energy sources by exploring alternative fuels, renewable energy options, or energy-saving technologies that reduce reliance on oil.
2. Long-Term Contracts: Secure long-term contracts with suppliers to mitigate the volatility of oil prices, providing stability and predictability for both parties involved.
3. Collaboration and Partnerships: Forge partnerships with energy-related businesses or institutions specializing in alternative energy sources to leverage expertise, resources, and potentially share costs.
In conclusion, the projected rise in oil prices in the second half of 2023 creates a challenging, yet potentially lucrative environment for new businesses. By embracing alternative energy solutions, innovating in energy efficiency, and adopting adaptive strategies, businesses can position themselves for success amidst evolving market dynamics.
Article First Published at: https://www.cnbc.com/2023/07/22/oil-markets-to-face-serious-problems-as-demand-rises-ief.html.svg)
