The balance of economic power is shifting eastwards, said Prince Abdul Aziz bin Salman, assistant minister of petroleum and mineral resources, while addressing a petrochemical conference in Dubai on Wednesday.
“The global economy is still facing some significant headwinds; the balance of economic power is shifting eastward. The size of the middle class is expanding in many emerging economies and new patterns of energy trade flows and energy relations are evolving,” the prince said.
In his keynote address, Prince Abdul Aziz  said Saudi Arabia remains unconcerned by surging US shale output, which threatens to eat into OPEC's market share, and sees no need to cut production to support prices.
“We need to make sure that the world economy comes out decisively on a growth pattern and, if that can be established, I think that the world economic growth will be sufficient to handle growth from all sorts — shale oil, shale gas, tight oil and including renewable," he said as quoted by Arab News .
“The world economy over the long term will need every contribution of every source of energy available," he said. "The Kingdom welcomes new resources of energy supplies, as they are needed," he added.
The Organization of the Petroleum Exporting Countries expects global demand for its crude to fall in the next five years because of increasing supplies outside the 12-member group from the boom in shale energy and other sources, according to its annual
World Oil Outlook.
Despite the surge, Prince Abdul Aziz repeated the Saudi Arabian view expressed by Oil Minister Ali Al-Naimi that there is enough global demand to soak up US shale and Saudi oil, with more oil in the market helping bring down global crude prices to comfortable levels for all.
"It’s a very stable market, it is well supplied. The future holds that the market will continue to be well supplied," the minister said.Prince Abdul Aziz’s comments on the current stability of the oil market echo those of several other OPEC oil officials over the last few weeks, which suggests the group will not change its output ceiling of 30 million barrels per day when it meets in Vienna on Dec. 4.
US shale oil i s much more costly to produce than Middle East crude, but a surge in global oil prices over the last four years has made it economic to produce and reduced demand for other crudes.
The North American shale oil surge, combined with record Saudi crude output, has helped arrest the rise in crude prices over the last year, with Benchmark Brent crude oil trading between $100 and $120 for most of the last 12 months. Saudi Arabia would consider cutting its production to support oil prices if prices fall significantly, the minister said.
“The price is good for everybody, it enables the producer to produce and continue to produce and I don’t think it’s affecting the international economy in any bad way,” he told reporters on the sidelines of the conference. “But so far everybody is enjoying a wonderful stable market, everyone is prosperous. There are people in Texas who say they are pushing the pedal to the metal and everybody is enjoying it.”
Prince Abdul Aziz said: “A few years ago, peak oil enthusiasts dominated the energy scene, insisting that global oil production was beyond its peak. The view in the Kingdom has always been that peak oil is not upon us, and that the main challenge facing the energy industry has never been a lack of resources. Rather the real challenge has always been to extract and deliver energy resources to markets in an efficient, reliable, and sustainable way; and indeed time has proved this view.”
He added: Concerns over oil supply tightness have been replaced with perceptions of abundant oil resources. As our minister Al-Naimi has recently noted, "in the blink of an eye, the scarcity scaremongers have been replaced by the apostles of plenty." This shift in market perception from energy scarcity to abundance comes as no surprise.
The experience in Saudi Arabia bears out this plentiful endowment. Despite years of being a reliable energy supplier to local and international markets, Saudi Arabia’s oil and gas reserves continue to expand. This is due in large part to technological advances and innovations that have enabled the industry to increase availability and unlock energy resources in many parts of the world. So technology has always been and will continue to be the main driver in shaping the energy sector.
Prince Abdul Aziz said globalization, industrialization, urbanization, and rapid development — all fueled by energy — have lifted hundreds of millions of people out of poverty and created a substantial middle class in emerging markets. In Asia alone, 525 million people can be considered as middle class  — this is more than the EU population. Although less robust than in Asia, middle class growth in the Middle East has also been notable, contributing to increased consumption in many countries, in resource-rich countries in particular. Over the next two decades, the size of the global middle class is expected to grow from the current level of 1.8 billion to 3.2 billion in 2020 and to 4.9 billion in 2030, with the bulk of this expansion occurring in Asia.
The rise of this new middle class will fundamentally change the commercial landscape. It will provide vast opportunities for the global energy and petrochemical industry, as consumption patterns shift from the developed economies toward emerging economies in Asia and resource-rich economies in the Middle East. Unlike their Western counterparts, the new emerging middle class will be made up of younger people eager to increase their consumption. The demand for many petrochemical products will rise with growing sales of home appliances, automobiles, communication devices, medical equipment, and clothing.
But with opportunities also come great challenges, the prince said. The GCC petrochemical industry is at a critical juncture and it must be well prepared and positioned to meet four such challenges.
The first challenge relates to heightened global competition in the global petrochemical sector. In the next decade, the petrochemical industry in the GCC will face stiffer competition from new players with more energy efficient plants, more availability of gas, and greater access to technology, and higher capacity to innovate.
The second challenge is the wave of increased protectionism and trade barriers in many parts of the world, aimed to protect domestic industry from international competition.
The third challenge relates to the small size of the local and regional markets for petrochemical products. Over the years, this industry in the GCC has developed a strong global distribution network through its own marketing organizations and its international partners.
Prince Abdul Aziz said the petrochemical industry in the GCC can look back on many important achievements over the last three decades. Capitalizing on the region’s immense oil and gas wealth, it has transformed itself into a leading player on the global chemical scene.
This is not an easy task and there will be many difficulties along the way. But as Winston Churchill once said: ‘A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.’ Despite the many challenges it faces in these dynamic times, I am optimistic that the energy and petrochemical industry in the region will grasp these vast opportunities and realize its immense potential.