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Opec pours cold water on IEA’s ‘peak’ for oil demand

Opec's Haitham Al Ghais told Adipec that the oil industry needs $600bn of investment a year Reuters
Opec's Haitham Al Ghais told Adipec that the oil industry needs $600bn of investment a year
  • Opec calls IEA view ‘dangerous’
  • Bodies at odds over forecasts
  • ‘Peak’ date differs by decade at least

Opec, the group of oil-producing countries, has taken issue with assumptions by the International Energy Agency that demand for fossil fuels would peak before 2030, saying they present a danger to economies and billions of people. 

“Such narratives only set the global energy system up to fail spectacularly. It would lead to energy chaos on a potentially unprecedented scale,” said Opec secretary general Haitham al Ghais in a statement.

He was reacting to a recent op-ed by IEA executive director Fatih Birol published in the Financial Times, saying that new IEA estimates show “this age of seemingly relentless growth is set to come to an end this decade, bringing with it significant implications for the global energy sector and the fight against climate change”.

Opec said that this extremely risky narrative to dismiss fossil fuels or to suggest that they are at the beginning of the end is ideologically driven, rather than fact-based.

It added that what made the projections “so dangerous” is they are often accompanied by calls to stop new oil and gas investments and represent a threat to global energy security.

The organisation estimates that $12 trillion of investment is needed to meet rising global oil demand by 2045.

The energy security issues climbed back to the top of the agenda for many populations in recent years, as many glimpse how experimental net zero policies and targets impact their lives, said Opec.

The Saudi Arabia-led group also said that such predictions do not take into account the technological progress the oil and gas industry makes to cut emissions and that 80 percent of the global energy mix comes from fossil fuels, the same as 30 years ago, or that the energy security they provide is vital.

Opec added that technological innovation is a key focus for its members, which are heavily investing in hydrogen projects; carbon capture, utilisation and storage facilities; the circular carbon economy and renewables.

The UAE, the third largest Opec producer, is preparing to host the UN’s Cop28 summit in late November. 

The country has nominated Sultan Al Jaber, CEO of the national oil company Adnoc, as the Cop28 president-designate.

The Emirati government recognises the realities of climate change but argues there can be no meaningful debate without the involvement of fossil fuel producers.

The IEA says that more needs to be done to limit global warming to 1.5C, the ambitious target nations agreed to under the Paris climate agreement.

Discordant forecasts

The IEA’s long-term forecast for energy demand, set to be published in October, will suggest the growth of clean energy technologies such as solar panels and electric vehicles, the structural shifts in China’s economy, and ramifications of the global energy crisis will cause fossil fuel demand to decline faster than anticipated and before the end of the decade.

Opec on Tuesday confirmed its forecasts for robust growth in global oil demand in 2023 and 2024, given the signs that major economies are faring better than expected despite headwinds such as high interest rates and elevated inflation.

World oil demand will rise by 2.25 million barrels per day (bpd) in 2024, compared with growth of 2.44 million bpd in 2023, Opec said in a monthly report.

The Energy Information Administration (EIA) cut its oil demand growth estimate for 2024 by 250,000 bpd to 1.36 million bpd. The agency forecast the 2023 world oil demand growth at 1.81 million bpd.

“High oil prices combined with uncertain economic conditions could lessen global demand for petroleum products through 2024,” said EIA administrator Joe DeCarolis in a statement.

In the long-term forecast published by Opec last October 2022, the organisation said that global oil demand would not peak until 2040.

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