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OPEC Chief Challenges Reports Predicting Demise of Oil Demand

Reports on what authors like to call the end of the oil era were a frequent reading some 20 years ago. At the time, the focus was peak supply and the consequent need to find alternatives to the fuel that powers the world.
Now, 20 years later, there is once again a surge in reports and analyses predicting the end of the oil era. This time, however, they focus on the death of demand driven by alternative sources of energy. And the world’s biggest oil-producing group has had enough.
In an op-ed for the Middle East Economic Survey last week, OPEC Secretary General Haitham Al Ghais called on those predicting the end of oil to take it a bit easier because these predictions could be dangerous—especially since oil demand is very much not declining as the predictions say.
“Such assertions, despite all evidence to the contrary, are all the more dangerous given their potential to foster energy policies that stoke energy chaos,” Al Ghais said, citing a report by the Economist on, as he put it, “the end of oil.”
Interestingly enough, the Economist has published several articles recently on the topic of peak oil in evidence of the importance of the topic and, perhaps more importantly, the importance that some appear to see in trying to convince the public that human civilization can and should survive without oil. But, asks OPEC’s head, “What if investments in supply fall as a result, but demand for oil keeps increasing, as we are seeing today?”
This is not a new argument. In fact, it is OPEC’s main argument in the war of words with organizations such as the International Energy Agency, which last year called “the beginning of the end” of the oil and gas era, forecasting demand for all three hydrocarbon fuels would peak by 2030.
The International Energy Agency is also the outlet that just recently forecast sales of EVs—a major factor for oil demand destruction according to all predictions—will boom this year, even though sales data from the first three months of the year shows a marked slowdown. Also, it was just revealed by UBS that Norway, which has the highest per-capita penetration rate in EVs, has not moved the needle on oil demand at all since it started on its electrification journey.
OPEC has repeatedly argued that such forecasts are not grounded in reality and that amplifying them could sap new investment in oil and gas supply that the world needs. This, in turn, would eventually lead to a deficit and higher prices, which no consuming country would want to experience.
In the MEES op-ed, however, Al Ghais went a step further, calling transition advocates out on their change of priorities. “Although the main goal of the Paris Agreement on climate change is to reduce emissions – not to choose energy sources – it feels like this has been forgotten,” the OPEC chief wrote. It has been “replaced by rigid narratives to reduce demand for hydrocarbons without thinking through the effects on energy security, socio-economic development, or reducing energy poverty,” he said.
Once again, it is quite difficult to argue with this assertion in light of strong transition NGO opposition to carbon capture, for example. The technology, while not tested at scale and still quite expensive, exists to slash emissions from oil and gas production, and power generation. Yet those NGOs seem to be more concerned with the fact of the oil industry’s existence than the generation of emissions.
The topic of energy poverty that Haitham al Ghais notes in his op-ed is another important one—and a topic that climate activists only discuss in the context of the cheap wind and solar narrative. The question of why, if they are so cheap, the poorest countries in the world have not embraced these two, remains outside the spotlight, however.
Energy poverty is a huge concern in most of the world, population-wise speaking. There are hundreds of millions of people with no access to any electricity, let alone one generated by wind and solar. A lot of these people want to be able to produce their own electricity from their own national resources, yet lenders such as the International Monetary Fund and the World Bank are limiting access to funding for projects unless they are “aligned” with transition targets—essentially dooming these people to energy poverty.
At least that would have been the case had the oil industry not decided to go with its gut and its knowledge and continue investing in new supply. The problem with this is that the rate of investment is slowing down while oil demand isn’t, which is why OPEC has been warning about underinvestment so insistently.
Of course, a counter-argument could be made that the producers’ cartel is grasping for straws in a world where oil is on its way out—only it would not reflect reality. Just look at Norway and its EVs.
By Irina Slav for Oilprice.com
May 1, 2024 15:07
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