Report by group of countries exporting oil predicts 16-million-barrel-a-day increase in oil consumption through 2045, contradicting IEA claims
OPEC and IEA had locked horns earlier this year over their opposite stands on energy investment required by the oil and gas industry, with OPEC asking the IEA to be ‘very careful’ about discouraging investments in the oil industry. Photo: iStock As the world’s oil demand reached an all-time high of 103 million barrels per day in June this year, the global economy’s appetite for oil appears to be growing. This sentiment aligns with the forecast of the Organization of the Petroleum Exporting Countries (OPEC) in its World Oil Outlook Report 2023.
OPEC is a group of 13 oil-producing nations. It will, reportedly for the first time, also have a pavilion at the annual climate summit, 28th Conference of Parties (COP28) to the United Nations Framework Convention on Climate Change, to be held in Dubai, United Arab Emirates (UAE) this year.
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The OPEC report predicted a 16-million-barrel-a-day increase in oil consumption from 2022 to 2045, reaching almost 116 million barrels a day by 2045. But this contrasted with what the Executive Director of the International Energy Agency (IEA), Fatih Birol, claimed in September: “….our latest projections show….oil demand is on course to peak before 2030.”
The demand for oil, gas and coal is expected to decline after this decade, as stated by Birol in an op-ed for the British business newspaper Financial Times. The assertion was sharply criticised by OPEC in a statement published two days after the op-ed’s release. OPEC referred to the narrative that fossil fuels are at the beginning of their end [as expressed by Birol] as “an extremely risky and impractical narrative.”
OPEC Secretary General Haitham Al Ghais argued this narrative could cause “energy chaos on a potentially unprecedented scale” and labelled it as ideologically driven rather than fact-based. OPEC and IEA had locked horns earlier this year over their opposite stands on energy investment required by the oil and gas industry, with OPEC asking the IEA to be ‘very careful’ about discouraging investments in the oil industry.
It is important to note Birol emphasised the declines would not be steep enough to put the world on a path to limit global warming to 1.5 degrees Celsius.
At the Abu Dhabi International Petroleum Exhibition & Conference, touted as the biggest energy conference in West Asia and hosted by the Abu Dhabi National Oil Company (ADNOC) earlier this month, oil and gas executives expressed the need for the industry’s voice to be heard in climate negotiations, emphasising that the oil industry is ‘central’ to energy transitions.
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At the heart of this discourse is COP28 — poised to be led this year by oil baron and ADNOC head Sultan Al Jaber. This choice of leadership has brewed controversy, with climate advocates sounding the alarm over a glaring conflict of interest.
As the UAE strives to convey sincerity in forging consensus in Dubai on emissions cuts, it simultaneously seeks to extend an invitation to the fossil fuel industry, granting a voice at the high table.
As the UAE leader proclaimed, the ambition for COP28 to be “inclusive” and to deliver a “game-changing outcome” for addressing climate change, one might wonder whether this inclusivity implies the involvement of voices from the oil and gas industry in the hallowed COP process.
American journalist Amy Westervelt contended the fossil fuel industry has always wielded influence within the COP process, shaping climate diplomacy since the 1992 Rio Summit. Corporate interests have steered negotiations and public relations firms and industry-linked entities remain pivotal in climate dialogues. What’s new in this era is that oil and gas corporations not only hold a place at the COP high table but also command it.
The oil and gas industry’s aim is to make a compelling argument for the enduring relevance of the oil and gas sector in the ever-evolving energy landscape, emphasising its role in the transition away from coal.
Pavilions are spaces at COP venues where governments and civil society organise events and exhibit their research. The intent for the fossil fuel industry here — as an OPEC pavilion may signal — is to enhance participation in climate negotiations by embracing the energy transition agenda.
However, as OPEC estimates the investment requirement at $14 trillion to meet the global oil demand projected in its latest report, it is abundantly clear that the industry is not convinced that renewables alone can bear the weight of energy demand in the coming decades and they intend to make sure everyone knows it.
The fossil fuel industry bolsters its relevance by pointing to energy security. However, when the 2021 energy crisis hit, OPEC+ countries, which include a larger group of oil-producing countries including Russia, decided to cut oil production.
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So, when oil-producing countries promote oil as a transitional fuel, what does it mean for countries with domestic coal reserves but who are large-scale importers of oil, such as India? OPEC’s oil outlook projected the greatest volume of demand for oil to come from India.
The country will add 6.6 million barrels per day to oil demand over the forecast period, it said. However, when oil prices rallied above $93 per barrel at the end of September, Indian officials highlighted their concerns, calling the high prices “too difficult to pass”.
As India’s net energy import dependence has risen by 7.8 per cent in the energy mix over the past decade, with further growth anticipated, advocating for the phased reduction of coal while regarding oil and gas as transitional energy sources does not help to address the nation's concerns regarding energy security and affordability.
This dichotomy between calls to phase down fossil fuels while advocating for increased role and relevance of the oil and gas industry in the energy transition becomes a central issue to unravel.
So, when Sultan Al Jaber claimed the phase down of fossil fuel is inevitable, or when the European countries advocated a phase out of “unabated” fossil fuels, there is a lot to deconstruct in the argument and perhaps much of it may become very clear to the world at Dubai in December.
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