ENERGY ASIA: Conflicts, turbulent geopolitics will reinforce belief in oil, gas: Aramco CEO

The world is unlikely to witness a collapse of oil demand anytime soon as turbulent geopolitics and conflicts will reinforce the need for fossil fuels for energy security, even more at a time when the pace of energy transition remains slow and expensive, Amir Nasser, CEO of Saudi Aramco, told the Energy Asia conference June 16.

The comments from the Middle East's biggest oil producer come at a time when Israel's latest strikes on Iran mark a new escalation in the Middle East, directly hitting Iran's economic lifelines, raising concerns about further attacks on critical oil infrastructure and raising the threat of disruption to oil flows.

"History tells us many things," Nasser told the conference in a recorded address, adding that when conflicts occur, the importance of oil and gas increases. "We are witnessing this in real time with threats to energy security continuing to cause global concern."

Oil analysts at S&P Global Commodity Insights said in a note that oil price risk premiums could rise sharply if Iran conducts broader retaliatory attacks. An escalation of tensions could also boost freight rates and tanker insurance premiums, narrow the Brent-Dubai spread and hurt refinery margins, particularly in Asia. If Iranian crude exports are disrupted, Chinese refiners, the sole buyers of Iranian barrels, would need to seek alternative grades from other Middle Eastern countries and Russian crudes.

"The world has certainly learned a lot more about the challenges of the global energy transition. Unfortunately, much of that learning has come from reality. Reality has revealed a transition plan that is being oversold," Nasser said.

"We were told that energy transition would be rapid and inevitably mean the collapse of conventional energy. Yet, global oil demand still exceeds 100 million b/d, with no sign of collapse," he added.

Asia's energy demand mix

According to S&P Global Commodity Insights, a three-speed Asia will define the overall oil demand outlook to 2050. As China's pivot to a declining market is increasingly confirmed, the Asian market is set to run at different speeds -- gradual ongoing transition impacts in OECD Asia, a switch away from growth in China and continued growth in non-OECD Asia.

China has pivoted from being the engine of global oil demand growth to a maturing, and now gradually declining, market as electrification, demographics and policy shifts take hold. Meanwhile, India is now a critical counterweight to slowing demand in mature and transitioning markets, making it the central pillar of future refined product demand in Asia and a key driver of global oil consumption growth through at least the end of this decade, Commodity Insights added.

Nasser added that the energy transition process was proving to be incredibly expensive.

"Public doubts are growing as fairy tales and fantasies meet realities on the ground. Asia will be looking to meet every demand from every source. Pragmatism in realizing ideas is a good thing, particularly for Asia as the engine of global growth. Solar and EVs are not even meeting today's demand growth. Tomorrow, that's why oil and gas will be a crucial part of the energy mix," Nasser said.