Twilight of the Petrostate and the rise of alternatives


May 23, 2016 (LBO) – Russian billionaire Petr Aven and two Moscow economists have published an article titled the “Twilight of the Petrostate” warning of alternative energy sources and cheaper extraction techniques that could hurt revenues of oil exporting nations.

“The influence of the Petroleum Leviathan — the handful of producing countries with the ability to exercise a heavy influence on the price of oil — will fall victim to the invisible hand of the market, which increasingly is armed with new oil extraction, energy-saving technologies and non-petroleum solutions in transport, power generation and petrochemistry,” they write.

Aven, who made almost 2 billion dollars in 2013, when Alfa Group sold its share of an oil company, knows the subject of oil well. He was also Russia’s foreign trade minister in 1992.

According to the writers, about 20 countries around the world, from Russia to Venezuela, and from Kazakhstan to the Persian Gulf, are dependent on a single number: the price of oil.

“Some, primarily Persian Gulf states, live entirely off their oil and gas wealth. They rely on crude oil, natural gas and petroleum products for 50 percent of their Gross Domestic Product and for 70-plus percent of their budget revenue. Some 15 countries generate more than 50 percent of their export earnings from oil, gas and petroleum product sales,” they wrote.

“Only those countries that embrace modernization and carry it further than they did in the previous oil downcycle can hope not be relegated to a historical footnote. The rest will be condemned to economic enclavization centered on a resource that is steadily losing value.”

Even though demand for oil has continuously risen, the prediction this time raises concerns that prices may not recover from this down cycle. Brent crude was trading at 48.60 dollars a barrel on Monday, down 0.25 percent.

The full article can be read here