Oil Prices Begin To Recover, Former Minister Of Energy And Mineral Resources Arcandra Tahar Explains The Cause

Arcandra Tahar (Photo: Instagram @arcandra.tahar)

JAKARTA – The Minister of Energy and Mineral Resources (ESDM) for the 2016 period, Arcandra Tahar, explained the phenomenon of the recovery of world oil prices despite the COVID-19 pandemic. According to him, there are three main reasons why there is an appreciation for these fossil commodities.

"First, many countries have vaccinated their citizens so that relaxation of social and economic activities gives hope that the economy will revive," he said via his Instagram account @arcandra.tahar on Saturday, June 27.

Arcandra added that this economic recovery will automatically increase energy demand.

"Although renewable energy is widely used, the need for fossil energy cannot be replaced in the next two decades, including the need for oil and gas," he said.

Second, fears of permanent damage to world oil needs, including prices that are unlikely to recover due to COVID-19, have proven to be non-existent, at least until now, he said.

"In fact, the need for crude oil is expected to recover as before the pandemic in 2022, which is around 100 million BOPD (Barrel of Oil Per Day). This optimism has contributed to the increase in crude oil prices to the level in June," he said.

Third, OPEC (organization of world oil producing countries) in maintaining production levels. Called Arcandra, OPEC has not been provoked to increase production despite rising demand.

Oil stored in storage tanks in both producing and consuming countries is used to meet this increasing demand for crude oil. As a result, inventory levels have decreased significantly since May 2021.

"So, if supply does not increase while demand increases, the price of crude oil will rise, especially if the inventories of oil reserves in developed countries are running low," he said.

To note, in the period of June 2021, world oil prices have perched at 75 US dollars per barrel. According to energy observers, the price tag is quite convenient for business actors in the upstream and downstream oil and gas sectors.

Earlier at the beginning of the pandemic last year, Brent crude had experienced great pressure and was trading at the level of 24 US dollars per barrel.