Amidst a resurgence in discussions surrounding the decline of the oil era, reminiscent of similar dialogues from two decades prior, a fresh narrative has emerged. This time, the spotlight shines on the waning demand for oil, propelled by the rise of alternative energy sources. In response, OPEC, the world’s largest oil-producing group, has issued a stern admonition against premature proclamations of the demise of oil.
In a recent op-ed for the Middle East Economic Survey, OPEC Secretary General Haitham Al Ghais cautioned against the perilous consequences of prematurely predicting the end of oil. Al Ghais emphasized the continued robustness of oil demand, contrary to projections suggesting otherwise. He highlighted the potential destabilization of energy policies if such forecasts were heeded, referencing a report by The Economist dubbing it “the end of oil.”
Interestingly, The Economist has featured multiple articles on the subject of peak oil, underlining its significance and the efforts to advocate for a future devoid of oil dependency. However, Al Ghais challenges this narrative by questioning the repercussions if investment in oil supply dwindles while demand persists, a scenario observed in the current landscape.
This dispute is not novel; it mirrors OPEC’s longstanding contention with organizations like the International Energy Agency (IEA). The IEA’s proclamation last year of the “beginning of the end” for the oil and gas era, with a forecasted peak in demand by 2030, has been a point of contention. Despite projections of Electric Vehicles (EVs) heralding a decline in oil demand, recent data indicates a subdued growth in sales. Even Norway, a frontrunner in EV adoption, has failed to significantly impact oil demand.
OPEC asserts that such forecasts lack grounding in reality and may deter crucial investment in oil and gas infrastructure, leading to supply deficits and price spikes. Al Ghais, in his op-ed, criticizes advocates of energy transition for neglecting the broader objectives of climate agreements, prioritizing a reduction in hydrocarbon demand over considerations of energy security and socio-economic development.
Moreover, Al Ghais highlights the issue of energy poverty, often overlooked in discussions advocating for wind and solar energy. Many developing nations lack access to electricity, yet face hurdles in securing funding for energy projects that don’t align with transition goals. The disparity between cheap renewable energy narratives and the reality facing the world’s poorest remains stark.
Despite challenges, OPEC continues to stress the importance of sustained investment in oil production to meet global demand. However, the rate of investment is diminishing, raising concerns about future supply adequacy.
Critics may argue that OPEC’s stance reflects desperation in a changing energy landscape, yet empirical evidence, such as Norway’s experience with EVs, suggests otherwise.