Saudi Aramco said a lack of investment in fossil fuels was to blame for the global energy crisis and warned that spare production capacity in the oil market might be wiped out once economies rebound.
“When the global economy recovers, we can expect demand to rebound further, eliminating the little spare oil production capacity out there,” Aramco’s chief executive officer, Amin Nasser, said in a speech on Tuesday. “By the time the world wakes up to these blind spots, it may be too late to change course. I am seriously concerned.”
The world’s biggest oil company has, along with rivals in the United Arab Emirates and elsewhere in the Persian Gulf, repeatedly said governments and investors in the West are being unrealistic about how quickly renewable energy can replace oil and gas. They’ve cited the surge in energy prices over the past year as evidence of that.
Oil Investments Slump
Oil and gas investments slumped from $700 billion in 2014 to $300 billion in 2021, according to Nasser, with increases this year being “too little, too late.”
Crude climbed above $125 a barrel in the wake of Russia’s invasion of Ukraine, though its since dropped to $90, while European gas prices hit record highs.
“The conflict in Ukraine has certainly intensified the effects of the energy crisis, but it is not the root cause,” the CEO said. “Sadly, even if the conflict stopped today, as we all wish, the crisis would not end.”
Saudi Arabia and the UAE are among the few members of the OPEC cartel with significant oil-output buffers. They’re each spending billions of dollars to increase their production capacity further, yet the projects will take a few years at least to be completed.
Western nations are paying the price for shutting down oil- and coal-fired power plants before solar and wind could take over, said Nasser.
“As this crisis has shown, the plan was just a chain of sandcastles that waves of reality have washed away,” he said. “And billions around the world now face the energy access and cost of living consequences that are likely to be severe and prolonged.”
Europe, in particular, faces “a colder, harder winter,” he said.
Saudi Arabia, the world’s biggest oil exporter, argues that demand for fossil fuels will stay strong for decades and that their use can only be reduced gradually. The country has still committed to neutralizing its carbon emissions by 2060 and is investing in solar and hydrogen as part of that.
© 2022 Bloomberg L.P.