The head of the Organization of the Petroleum Exporting Countries (OPEC) has warned that a lack of investment in the oil industry could lead to a dangerous rise in oil prices and threaten global energy security. Haitham Al Ghais, OPEC’s secretary-general, told CNN on Monday that at least $12 trillion is needed in the oil sector by 2045 to meet the growing demand and avoid price volatility.
Oil underinvestment is ‘dangerous’
Al Ghais said that underinvestment in the oil industry is “dangerous” and could have serious consequences for the world economy and the environment. He said that without adequate investment, oil supply could fall short of demand, creating a gap that would push prices higher and increase the risk of instability and conflict.
“By underinvesting, we are actually endangering energy security… Without this [investment], I think there are serious possibilities that prices, the volatility, will be increasing as demand grows,” he said.
He added that oil is still a vital source of energy for many countries, especially in the developing world, and that it is essential to ensure its availability and affordability. He also said that oil can play a role in the transition to a low-carbon future, as long as it is produced and consumed in a sustainable and efficient manner.
Oil prices near $100 a barrel
Oil prices have been rising steadily in recent months, reaching their highest levels since last November. Brent crude oil, the global benchmark, has climbed 29% since a low in mid-June and last week traded near $97 a barrel. The main drivers of the price increase are the extended output cuts by Saudi Arabia and Russia, the two largest producers in the OPEC+ alliance, and the recovery in demand from the pandemic-induced slump.
Some analysts have predicted that oil prices could reach $100 a barrel or more in the near future, as the market tightens and supply disruptions persist. Al Ghais said that OPEC does not forecast prices, but acknowledged that the factors that could lead to such a scenario have been present for some time.
“The factors that may lead to this number … have been there for some time and continue to be there — most notably, the under investments that we’ve seen in oil,” he said.
OPEC’s role in balancing the market
OPEC, along with its allies in the OPEC+ group, has been managing the oil market since 2016, when it agreed to cut production to support prices and balance the supply and demand. The group has adjusted its output levels several times since then, in response to changing market conditions and external shocks, such as the Covid-19 pandemic and the US sanctions on Iran and Venezuela.
Al Ghais said that OPEC’s role is to ensure stability and predictability in the oil market, and to foster cooperation and dialogue among producers and consumers. He said that OPEC is committed to maintaining its production policy, which is based on data and analysis, and to reviewing it regularly to adapt to the evolving situation.
He also said that OPEC is open to engaging with other stakeholders, such as the US, China, India, and the European Union, to address the common challenges and opportunities in the energy sector. He said that OPEC welcomes the efforts to combat climate change and to promote clean energy, but stressed that these should be done in a fair and inclusive way, respecting the different circumstances and needs of each country.