Do you know what toothpaste, cameras, soap, computers, jet fuel, car wheels, contact lenses and prosthetics have in common?
Oil: If oil were to disappear today, we would lose many important goods and services that require oil or an oil derivative. Without oil, we would see transportation grounded to a halt, homes frozen, supply chains disrupted, and a rise in energy poverty.
The 2022’ World Energy Outlook’ published by the Energy Institute in the United Kingdom, and KPMG and Kearney (two consulting firms) stressed that fossil fuels will power 82 percent of global energy production in 2022. These projections are aligned with those of the latest report released by the Organization of Petroleum Exporting Countries (OPEC), ‘World Oil Outlook,’ which assesses in the medium and long term future of the sector. It is worth noting that the projected share of fossil fuels is similar to those that had been projected for the past 30 years.
Why, then, are vital commodities like oil and gas ignored in discussions about the energy transition? They are crucial to improving global living standards, safeguarding stability, economic growth, and energy security, and the sector is striving to develop technologies that reduce emissions. Climate change is a very important issue, but its significance should not be emphasized at the expense of other issues like rising global energy growth.
To the contrary, we must work together to reduce emissions and ensure all the products and services we need to live comfortably. In order to achieve these objectives, OPEC members have invested in developing exploration, extraction, refining and manufacturing, while also making use of clean technologies and taking advantage of their extensive experience to reduce the emissions of oil sector operations. Investments are also being made in renewable energy, hydrogen, carbon capture, and the circular carbon economy.
In sum, we can simultaneously invest heavily in renewable energy and continue to produce the oil that everyone will need in the near future and the decades to come. We would thereby reinforce global stability, especially in times of turmoil, which is of great importance. Indeed, history shows that all energy transitions happen over decades and take many paths.
Let us take the example of electric cars. Although more units of the Toyota Prius have been manufactured than any other hybrid electric car since the late 1990s, studies by the National Automobile Dealers Association indicate that hybrids, plug-in hybrids and battery-powered cars account for 12.3 percent of the total number of cars sold in the United States in 2022.
While the growing popularity of electric cars cannot be disputed, battery-powered cars accounted for 19 percent of the total new car sales in China last year. Meanwhile petrol and diesel cars accounted for half of all cars sold in the European Union that same year.
Thus, when it comes to the transportation sector (and most other sectors, really) it would be unfair to overlook the fact that millions of people around the world will continue to depend on oil in the future. In fact, this dependence becomes more evident once we add the investments needed to meet the growing global demand for energy, ensure energy security, keep costs reasonable, and reduce emissions in line with the objectives set by the Paris Climate Agreement.
The world population continues to rise. OPEC’s ‘World Oil Outlook’ estimates that the global population will increase by 1.6 billion from now until 2045, the period it covers. Moreover, the United Nations estimates that the world population will reach 10.4 billion people by 2100.
At the same time, the organization’s “Global Oil Outlook” report indicates that the global energy demand is expected to grow by nearly 23 percent until 2045. It is also expected that the demand for oil will increase to reach the level of 110 million barrels per day.
Meanwhile, OPEC’s ‘World Oil Outlook’ report expects global energy demands to increase 23 percent between now and 2045, with demand for oil expected to rise to 110 million barrels per day.
Thus, oil will remain an essential part of our global energy infrastructure for decades to come. This projection presents a stark contrast to the many others made over the past decades that had claimed the oil age is over. Oil demand is almost at an all-time high, and it is expected to rise by nearly 5 million barrels per day between 2023 and 2024.
There can be no doubt as to whether current energy levels can meet the energy demand we will see in the future, and thus a broad approach that suits all people is needed. This approach must account for all sources of energy and encourage the development of all types of technology. In keeping with this approach, OPEC members have demonstrated their willingness, determination and ability to meet future energy needs, with an eye on both reducing emissions and eradicating energy poverty.
United Nations statistics indicate that over 700 million people live without electricity, and nearly a third of the world’s population uses inefficient methods and materials in cooking that pollute the planet. Life does not revolve around wants like cars, air conditioners and computers, but rather needs like electricity and heating. Oil ensures affordable and adequate energy supplies, thereby contributing to the eradication of energy poverty, and it will play a pivotal role in this regard. It is worth noting that developing countries continue to stress the importance of this matter, but what about developed countries?
The world - regardless of its geographical divisions - faces another quandary. It must confront the question of how to allocate sufficient funds for investment in the energy sector. The projected growth in oil demand alone requires massive investments to ensure its sustainability. Oil is expected to account for approximately 29 percent of the world’s energy needs until 2045. Ensuring this supply requires investments of $12.1 trillion, or more than $500 billion annually. Here, it should be noted that investment in recent years was insufficient.
OPEC warned of the serious repercussions we could see if sufficient investments are not put into the oil sector. Its research indicates that we could see a deficit of approximately 16 million barrels per day within the next five years, if investments in exploration and extraction, as some are demanded, are stopped.
The oil sector is pivotal to improving the living conditions of millions of people. If we want this sector to continue to play this noble role, if the world is serious about an orderly energy transition, and if we want to meet future energy demands and ensure universal energy security, then this severe investment deficit must be addressed as soon as possible.
The twenty-eighth Conference of the Parties to the United Nations Framework Convention on Climate Change (COP28), which will be held in the United Arab Emirates, provides an important opportunity for assessing the progress made in implementing the provision of the Paris Climate Agreement. COP28 President-designate Sultan Ahmed Al-Jaber stressed that the world must generate the greatest possible amount of energy while minimizing emissions. In order to reach this goal, a more realistic approach is required, especially given that we need all kinds of energy to meet the current and future global demand.
In conclusion, we cannot ignore the demands of any person, sector or state. We believe that the discussions and negotiations of COP28 will adopt this constructive approach. History is laden with examples of disruption and instability. They should serve as a stark warning of what would happen if decision-makers failed to grasp the intertwined complexities of the energy sector.
