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Energy round-up: six predictions for 2016

January 14, 2016

Energy round-up: six predictions for 2016

Photo credit:   James Russell

2015 proved to be an interesting year for energy and climate issues both globally and in the UK. Will 2016 hold more of the same?

Forecasting is a dangerous business, but here are six predictions you should keep an eye on.

1) The showdown on oil prices between Saudi Arabia and the US will intensify, and the Saudis will eventually break.

It looks like oil and gas prices are going to remain low for the foreseeable future, panicking both the oil industry in Saudi Arabia and the shale gas industry in the US.

The big question is whether Saudi Arabia can keep production high and prices low long enough to bankrupt enough of the American shale industry. The answer may come by the end of 2016 and several factors point to the Saudis breaking first.

For one, despite losses for the oil industry, low oil prices benefit many sectors in the US, especially as consumers now have more spending money in their pockets. However for Saudi Arabia, an oil-dependent economy, low prices are a clear loser.

There’s also the geopolitical dimension that will make worse Saudi Arabia’s financial problems. Saudi Arabia spends more on military spending as a percentage of GDP (11%) than any other country, is currently increasing this spending at a faster rate (21%) than any other country, and has a showdown with Iran on the horizon. To most observers, the public finances in Saudi Arabia are headed for disaster if nothing changes.

2) Renewables will set new records.

Despite low fossil fuel prices (including coal), wind and solar will set new records in 2016 for installations and generation on every continent. This is a pretty safe bet. For many markets, including the important US market, the year-to-year change in 2016 may set records too.

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