The head of OPEC said Thursday that the world will need to invest in fossil fuels for decades to prevent an energy shortage, dismissing predictions that oil demand will peak soon.
OPEC Secretary General Haitham Al Ghais said oil demand will grow by 25 million barrels per day, or bpd, in the developing world through 2045, with China and India alone contributing 10 million bpd, as billions of people need access to basic services such as electricity, cooking gas and transportation.
“Those that dismiss this reality are sowing the seeds for future energy shortfalls and increased volatility, and opening the door to a world where the gap between the ‘energy haves’ and ‘energy have nots’ grows even further,” Al Ghais said in a statement.
The OPEC chief called for “continued oil industry investment, today, tomorrow, and many decades into the future given the products derived from crude oil are essential for our daily lives.”
OPEC’s predictions of future demand starkly contrast with those of the International Energy Agency, whose membership is primarily developed economies in North America, Europe and Northeast Asia.
The IEA warned Wednesday that the world will face a massive surplus of oil in the coming years as production increases while demand slows and ultimately peaks by the end of the decade. Oil supply capacity will rise to 114 million bpd by 2030, 8 million barrels more than global demand, according to the IEA.
While oil demand will remain strong in Asia in the coming years, those gains will be offset by the adoption of electric cars, fuel efficiency and the declining use of oil for electricity generation in the Middle East, according to the IEA.
The looming surplus threatens to upend OPEC’s efforts to support prices and will challenge the rapid growth of the U.S. shale industry, according to the IEA. Oil companies should consider adjusting business strategies to prepare for the changes, IEA chief Fatih Birol said in a statement.
OPEC’s Al Ghais rejected those predictions, calling them “dangerous, especially for consumers and could lead to unprecedented volatility.”
Helima Croft, global head of commodity strategy at RBC Capital Markets, said everything would have break perfectly in terms of clean energy subsidies for the IEA’s predictions to come true.
Gains made by the far right in the European Union’s recent parliamentary elections and a potential Republican victory in the November U.S. elections are headwinds for the energy transition, Croft said.
“I’m just not sure that we’re facing the type of policy environment that could see this being realized, before we even talk about the demand side of the situation,” Croft said in an interview on CNBC’s “Last Call” Wednesday.
Robert McNally, president of the consulting firm Rapidan Energy, sees a shortage in transportation fuel by 2028 if more refineries are not built.
“I see no evidence of this imminent peak demand,” McNally said on “Last Call.” “Efficiency gains in cars aren’t rising fast enough and EVs can’t…
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