London — Stability in the oil market will be critical to the energy transition, OPEC Secretary General Mohammed Barkindo said Jan. 27, arguing that volatile prices would harm the global economy and dampen investment needed to meet future demand across all sources.
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"Stability begets stability, and this will be essential to helping bring on board the huge investments required in the years ahead," Barkindo said in prepared remarks to the S&P Global Platts Americas Petroleum and Energy Virtual Conference.
"Without the necessary investments, there is the potential for further volatility and a future energy shortfall, which is not in the interests of either producers or consumers."
OPEC, Russia and several other key oil producing countries have cooperated on a series of output cuts for more than four years to boost prices, including unprecedented 9.7 million b/d cuts in mid-2020 during the depths of the pandemic.
Those cuts are now being tapered gradually, though Saudi Arabia has announced a unilateral additional 1 million b/d cut for February and March to shore up the market as infection numbers have soared this winter.
Barkindo said the OPEC+ alliance would continue to take a month-by-month approach to deciding on quotas.
"It is clear the recovery has been fragile and uncertainties remain, particularly in terms of the pandemic," he said.
"Vaccines offer some much needed light at the end of the tunnel, but the ever increasing number of COVID-19 cases, and sadly human loss, as well as renewed lockdowns, are a harsh reminder of how delicate the situation remains."
Equitable energy transition
Brent prices have steadied around $55/b in recent weeks.
Stabilizing the oil market to foster a return of investment to the industry is a "core objective" of the OPEC+ alliance, Barkindo said.
He cited OPEC's 2020 World Oil Outlook, which estimated that $12.6 trillion in spending would be required through 2045. However, upstream capex has fallen by more than 30% in 2020.
"If this is not rectified it could leave long-term scars, not only for producers, but consumers too," said Barkindo, who has previously lashed out at environmental advocates who have pressured oil companies and governments to halt drilling.
While welcoming the Biden administration's return to the Paris Agreement -– a pact ratified by all OPEC members except Libya, Iran and Iraq -- he reiterated that most energy forecasts call for oil and gas to remain the dominant source of energy for decades as the global population grows.
But carbon capture and fuel efficiency technologies could play key roles in ensuring a sustainable oil industry, Barkindo said.
"It is vital that the required investments are made, in all energies, to ensure stable and continuous supplies, and to help reduce and, ultimately, eliminate emissions," he said.
The secretary general also said that phasing out fossil fuels too quickly could make energy too expensive for the global poor.
"If billions of people in the developing world suffering from a lack of energy access feel they are excluded from access to energies that have helped fuel the developed world, then this could sow further divisions and expand the divide between the haves and have nots, the global North and the South," he said.
"Let me be clear: nobody should be left behind in the energy transition."