Fossil Fuels, Renewables are Not Competitors: OPEC

In a recent address at the Global Government Summit, Haitam al Ghais, Secretary General, OPEC, emphasized the complementary nature of fossil fuels and renewables, dismissing the notion of competition between them. 

Al Ghais also stresses the indispensability of significant investments in the oil industry, projecting a surge in crude demand by 2045 that will require an investment of about US$14 trillion. He defends the role of oil and gas, which constitute 60% of the global energy mix, stating they would remain vital components in the future.

According to the International Energy Agency (IEA), an increase of 930Mb/d is forecasted for next year, compared to the initially calculated 880Mb/d. This deceleration is attributed to improvements in energy efficiency, growth in the adoption of electric vehicles, and the economic slowdown.

Rejecting calls for a complete transition to renewables, Al Ghais emphasized the critical role of oil in daily life and socioeconomic development. OPEC anticipates oil demand to reach 116MMb/d by 2045, necessitating annual investments of US$600 billion. Al Ghais advocated for member countries' investments to enhance production capacity, ensure global energy security, and reduce carbon emissions.

Al Ghais calls for a pragmatic approach to the energy transition that respects each country's autonomy in defining its path toward sustainability. He highlights OPEC's commitment to fight climate change, emphasizing the organization's belief in the continued importance of oil for economic and social progress.

Late last year, the IEA revised its oil demand growth projections for the upcoming year, indicating that global demand is set to surpass earlier forecasts for 2024. Despite the economic slowdown experienced in most major economies, the agency anticipates a more moderate increase compared to 2023. 

However, the IEA warns of a "vulnerable" balance in oil markets, projecting increased volatility in the future as demand continues to outpace supply. Factors contributing to this imbalance include ongoing economic and geopolitical risks. 

In its November monthly report, the IEA estimated that oil demand for 2023 will reach 102MMb/d by year-end, surpassing previous predictions by 2.4 million barrels. This increase is attributed to the resilient production in the United States and record-breaking demand from China in September, reaching 17.1 MMb/d. Looking ahead, the IEA anticipates a slowdown in demand growth for 2024, although it will still exceed previous estimates.

The recent negotiations at COP28 regarding the future of fossil fuels concluded with an agreement to transition away from them, despite initial proposals advocating for their phased elimination. The final agreement, amended to highlight emission reductions, was proposed by the United Arab Emirates, eliciting mixed reactions from participants. 

While hailed as a milestone by the UN, critics expressed dissatisfaction, warning that the resolution could allow oil companies to evade full commitment to global sustainability goals. This concern centers on the failure to mandate a phase-out of fossil fuels, potentially jeopardizing efforts to limit global temperature rise to 1.5°C.

The original proposal by Sultan Al-Jaber advocated for a gradual reduction in fossil fuel usage, emphasizing carbon capture and storage technologies. Despite objections, the final agreement urges nations to "reduce consumption and production of fossil fuels in a just, orderly, and equitable manner.”