Leaders of the world's most consequential energy bodies gathered for a forum Wednesday to discuss the uncertain future of oil as demand rebounds and prices climb, all while a growing roster of nations pledge to transition to cleaner forms of energy.
The forum, which included speakers from the Organization of Petroleum Exporting Countries, the International Energy Agency, and the International Energy Forum, presented varying forecasts for oil demand and discussed energy security and market stability.
Yet from the outset, the wider debate on how the world should best transition away from so-called dirty fuels and other sources of carbon emissions that pollute the air played out as speakers gave their remarks.
Major oil-producing nations, like Saudi Arabia and the United Arab Emirates, have long argued that a rapid energy transition away from the fossil fuels that they continue to rely on for revenue will impact global economic growth and hurt the world's poorest. Those backing a fast-tracked transition insist new investments in energy must go toward expanding existing wind and solar solutions and in funding innovative solutions if the world is to avoid catastrophic global warming levels. On both sides, however, there is agreement that the world is far from reaching sustainable targets as demand for energy grows.
“We are not on track. So how should policy makers respond to this dilemma? The reality is that 80 per cent of the world's energy needs continue to be met by fossil fuels,” said Joseph McMonigle, secretary general of the Saudi-based International Energy Forum that hosted the symposium. The IEF is the largest organization of energy ministers, with 71 member states, including the United States.
McMonigle said global energy demand has “roared back” to pre-pandemic levels, but that investments in oil and gas are not back to where they were before the COVID-19 crisis.
“Disinvestment in energy supply will not deliver a just and orderly transition and cannot be a response to the climate crisis,” he said, arguing that countries should invest in both greener forms of energy as well as fossil fuels.
The IEF has called for oil and gas investment to reach $525 billion through 2030 to ensure “market balance” despite a slowdown projected in how much demand for oil will grow. The group notes that investment in the oil and gas sector in 2021 stood at $341 billion. Without more financing, the IEF says demand could outstrip future supply within the next five to six years. They say it could also result in switching to more polluting energy sources such as wood and coal.
Others disagree. The International Energy Agency's executive director has said the world does not need more investments in new oil, gas, and coal projects.
From Paris, the IEA’s Fatih Birol did not directly address the comments made by McMonigle, but he echoed the sentiment that the energy transition must happen in an “orderly manner” so that climate targets are met and oil producing economies are seen as part of the solution.
To meet these targets, the world must reduce its consumption of fossil fuels, Birol said, before later adding: “We cannot drop oil and gas tomorrow.”
“The world will need oil and gas for several years to come. However, if we want to reach our climate targets, we would need less oil and less coal and less gas than we use today in an unabated format.”
The IEA says that for the world to reach net-zero emissions by 2050, annual clean energy investment worldwide will need to more than triple by 2030 to around $4 trillion. It has also called out the energy sector as the source of around 75 per cent of greenhouse gas emissions, a main driver in climate change.
The IEA estimates that world oil demand is set to expand by 3.2 million barrels per day this year, reaching 100.6 million barrels per day as restrictions to contain the spread of the coronavirus ease. Benchmark crude prices rose by more than 15 per cent in January to cross the $90 per barrel threshold for the first time in more than seven years.
The rebound in demand for oil, combined with a shortfall in energy investments, rising prices and market uncertainty has led to varying energy outlook scenarios. The diverging outlooks by OPEC, the IEF, IEA and others have an impact on how governments choose to formulate their energy policies and decide on production levels as they commit to net-zero pledges.
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