By 2030, it is projected that half a billion people will move to cities around the world, leading to increased demand for energy. Haitham Al Ghais, the secretary-general of OPEC, warned that the lack of investment in the oil industry poses a dangerous threat to energy security. He dismissed the notion that renewable energy alone will be able to meet the future demand for energy. According to Mr. Ghais, it is crucial for the world to address this underinvestment, as failing to do so would endanger energy security. He emphasized that the oil industry will require at least $12 trillion in investments globally from now until 2045, and there is a considerable possibility of increasing price volatility as demand grows.
Mr. Ghais pointed out that by 2030, over half a billion people will be moving into cities globally, making it impossible to meet the future energy demand through reliance on renewables alone. He also criticized the International Energy Agency (IEA) for suggesting that oil demand could drop by as much as 25 or 30 percent within the next six to seven years. Mr. Ghais argued that fossil fuel consumption has remained at around 80 percent globally for the past 30 years, making it unlikely for such a significant shift to occur in such a short period. He highlighted the challenges associated with the introduction of electric vehicles, the availability of critical minerals, and the logistical issues surrounding the global electrification required for an electric world.
The underinvestment in oil is a major concern for Mr. Ghais, who fears the potential impact on supply and volatility. This sentiment was echoed by Amin Nasser, the CEO of Saudi Aramco, who emphasized the need for more investment in the oil industry due to maturing oil fields and rising drilling costs. Mr. Nasser explained that an average decline rate of 6 percent in oil fields requires significant investment to offset the decline and maintain production levels. He emphasized that policymakers, regulators, and investors must ensure adequate investment in the sector to prevent long-term detrimental effects on global energy supply.
Additionally, Mr. Nasser attributed the underinvestment in the oil industry to the proliferation of environmental, social, and governance (ESG) policies. While he acknowledged that ESG is a positive trend, he expressed concerns about these policies targeting the oil sector. He argued that if ESG-driven policies automatically discriminate against conventional energy projects, it will result in underinvestment with serious implications for the global economy, energy affordability, and energy security. Mr. Nasser highlighted the increasing cost of capital for oil and gas projects due to perceived risks associated with ESG, leading to capital scarcity.
The ESG movement has gained significant support, with banks and investment companies committing to transition their lending portfolios to achieve net-zero emissions. However, this commitment has further limited access to capital for the oil and gas sector. Furthermore, the anti-fossil fuel policies implemented by the Biden administration have worsened the situation for the American oil and gas industry. President Biden’s actions, such as restricting oil and gas leases, rejoining the Paris Climate Agreement, and promoting the expansion of electric cars, have had a detrimental impact on the industry. All these factors contribute to the underinvestment in the oil sector, raising concerns about future energy security and supply.