Energy markets have reflected the uncertainty and shown exceptional movements. At the beginning of the crisis, plunging fuel demand in many key markets was reflected by prices: by the end of March 2020, the price of gas hit a 30-year low, whereas the price of oil, also affected by supply shocks showed the largest single-day decline in the past 22 years. As economies have reopened, energy commodities have shown a partial rebound: for example, by the end of third quarter 2020, oil demand in China was back at pre-Covid-19 levels, and 50 per cent of the decline was recovered in Europe and North America. Global energy demand in 2020 fell by 4 per cent, marking the largest decline since World War II and the biggest-ever absolute drop. However, based on Q1 data, projections for 2021 indicate that as Covid restrictions are lifted and economies recover, energy demand is expected to rebound by 4.6 per cent, pushing global energy use for this year 0.5 per cent above pre-Covid-19 levels.
Following its steep decline in 2020, oil has rallied nearly 50 per cent this year, with Brent crude touching $75 per barrel in June and the year-to-date average price much higher than the $43 per barrel last year. Even as demand picks up worldwide, and supply released by the Organization of Petroleum Exporting Countries and its allies (OPEC+) remains constrained, the outlook for prices looks promising. While the regional oil industry was impacted by the Covid-19 outbreak, a year on, the energy industry’s fundamentals are slowly improving as demand for oil products continues to pick up across the globe, which will also allow oil producers to restore supplies. Total energy investments in the MENA region for 2021-2025 are expected to increase slightly over last year’s five-year outlook – from $792bn to $805bn. Oil and gas investments are anticipated to witness a healthy uptick in next year’s outlook given the expected improvement in macro conditions. The GCC have set ambitious agendas to increase the share of renewables in the energy mix. As per the UAE’s 2050 strategy announced in 2017, the country plans to produce 44 per cent of its energy from renewables, 38 per cent from gas, 12 per cent from clean coal and 6 per cent from nuclear by 2050. The UAE, which aims to invest Dhs600bn by 2050 to meet the growing energy demand, also plans to reduce its carbon footprint from power generation by 70 per cent, leading to Dhs700bn in savings. The energy transition can no longer be limited to mitigation efforts or incremental steps. It must become a transformational effort, a system overhaul, based on the rapid upscaling of available technologies while innovating for the future. The emerging energy system must promote a more inclusive and equitable world, with resilience against economic and environmental shocks.