Download now: Cannabis Cash

Will India Deliver a Death Blow to OPEC?

Written by Keith Kohl
Posted June 16, 2017 at 4:24PM

Are we finally seeing OPEC lose its most important customers?

After years of low oil prices, the group now has to face off against the growing clean energy trend pushing many of its biggest customers away from oil.

One of these, India, could be a particularly large blow to OPEC’s dropping profits.

Demand for oil is slated to grow faster in India than anywhere else in the world between now and 2040, according to the International Energy Agency (IEA).

If this massive oil importer cuts back on its OPEC supply, the group could be looking at bigger challenges than those in Algeria and Venezuela.

And this isn’t the only market it’s looking to lose its grip on, either...

Banking on India

India is one of the biggest energy consumers today, and it will continue to be one of the fastest-growing emerging energy markets for years to come.

The IEA estimates that global energy consumption will increase by 48% by 2040, and over half of that new demand will come from China and India.

India especially has a long way to go: around 270 million people, nearly 20% of its massive population, live without access to electricity. And for those that have it, it’s not always reliable.

Now, the traditional solution would be to use more coal and oil.

These two have been the backbone of the energy industry from the start, and cheap, abundant supplies would normally make them the perfect answer to India’s energy problem.

But there’s a catch... India is second only to China in deaths caused by air pollution.

You’ve seen the pictures of Chinese cities swimming in fog...

india1

And India may face the same fate if it relies on these two fossil fuels to fix its energy deficit.

Unfortunately — for OPEC, anyway — this country, which gets a full 86% of its oil from OPEC, is cutting back on both coal and oil as it struggles to find a balance between improving its energy infrastructure and cleaner energy production.

Perhaps the biggest threat comes from India’s expansion of its EV market.

The country aims for all new cars to be all-electric by 2030.

EVs are already being hailed as the final blow to the petroleum industry.

And while I’m confident it’s not half that dramatic, reduced demand from as big a buyer as India could put a significant dent in OPEC’s profits.

The Natural Conclusion

When it comes to booming natural gas, the cartel doesn’t have a leg to stand on.

We’ve known for a long time that natural gas would be taking the spotlight as the clean energy debate rages on. I just don’t think OPEC was truly prepared to face the consequences.

The cartel only has one ace up its sleeve: Qatar, a world leader in gas and LNG exports.

That Saudi Arabia and a few other members are on the outs with Qatar right now puts the future of this relationship into question, but even with Qatar, OPEC just isn’t equipped to keep up.

Consider this: In 2015, the whole group produced over 29.2 trillion cubic feet of natural gas.

More than half of that came from Qatar alone.

That same year, the U.S. produced more than 28.7 trillion cubic feet all on its own.

Now, OPEC’s export numbers still far outweigh those from the U.S., but that won’t be true for long.

Our pipeline exports to Mexico are climbing higher every day, and enough LNG export terminals are expected to come online within the next few years to put the U.S. on par with top exporters Australia and Qatar.

image2615

India and China, the two fastest-growing energy markets in the world, may end up being the final battlegrounds for OPEC’s ongoing war.

But so much of that war is upon itself that the group is already losing.

I’ve said it before, and I’ll say it again: the new world order is right around the corner, and U.S. companies are coming out on top.

Time to start picking your stocks for the U.S.-dominated energy industry.

Until next time,

Keith Kohl Signature

Keith Kohl

follow basic@KeithKohl1 on Twitter

A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.

Comments

Elon Musk's Lithium Revolution is Upon Us

Question of the Day

How much student loan debt does the average millenial carry?