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LONDON: Politicians, lawmakers and insufficient investment in the oil and gas sector are to blame for high energy prices, not the Organization of the Petroleum Exporting Countries, the producer group’s new secretary-general, Haitham Al-Ghais, told Reuters on Thursday.
A lack of investment in the oil and gas sector following a drop in prices triggered by COVID-19 has significantly reduced OPEC’s spare production capacity and limited the group’s ability to respond quickly to further potential supply disruptions.
The price of Brent oil came close to a record high of $147 a barrel in March, after Russia’s order of troops to Ukraine exacerbated supply concerns. While prices have since fallen, they remain painfully high for consumers and businesses globally.
“Don’t blame OPEC, blame your own policymakers and lawmakers, because OPEC and the producing countries have pushed time and time again to invest in oil (and gas),” said Al-Ghais, who took office on August 1. in an online interview.
Oil and gas investment is up 10 percent from last year but remains well below 2019 levels, the International Energy Agency said last month, adding that some of the immediate shortfall in Russian exports had to be covered by production elsewhere.
The OPEC official also pointed to a lack of investment in the downstream sector, adding that OPEC members had increased refining capacity to balance the decline in Europe and the United States.
“We are not saying the world will live on fossil fuels forever … but by saying we are not going to invest in fossil fuels … you have to move from point A to point B overnight,” Al-Ghais said .
OPEC exists to ensure the world gets enough oil, but “it’s going to be very challenging and very difficult if there is no buy-in to the importance of investing,” he said, adding that he hopes “investors, financial institutions, policy makers which well globally seriously take this matter (to) heart and include it in their plans for the future.”
Relatively optimistic
Oil has been falling since March and Brent hit a six-month low below $92 a barrel this week.
The slide reflects fears of economic slowdown and hides physical market fundamentals, Al-Ghais said as he took a relatively upbeat view of the outlook for 2023 as the world grapples with rising inflation.
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Oil and gas investment is up 10 percent from last year but remains well below 2019 levels, the International Energy Agency said last month, adding that some of the immediate shortfall in Russian exports had to be covered by production elsewhere.
Oil has been falling since March and Brent hit a six-month low below $92 a barrel this week.
OPEC, plus Russia and other allies, known as OPEC+, have ended record oil production cuts in 2020 at the height of the pandemic and in September are increasing production by 100,000 barrels per day.
Ahead of the next OPEC+ meeting on September 5, Al-Ghais said it was too early to say what they will decide.
“There’s a lot of fear,” he said. “There’s a lot of speculation and anxiety, and that’s what’s mainly driving the price drop.”
“In the physical market, we see things much differently. Demand remains strong. We still feel very positive on demand and very optimistic on demand for the rest of this year.”
“The fear of China is really blown out of proportion in my view,” said Al-Ghais, who worked in China for four years earlier in his career. “China remains a phenomenal place for economic growth.”
OPEC, plus Russia and other allies, known as OPEC+, have ended record oil production cuts in 2020 at the height of the pandemic and in September are increasing production by 100,000 barrels per day.
Ahead of the next OPEC+ meeting on September 5, Al-Ghais said it was too early to say what they will decide, although he was positive about the outlook for next year.
“I want to be very clear about that – we can cut production if necessary, we can add production if necessary.”
– Everything depends on how things unfold. But we are still optimistic, as I said. We see a slowdown in demand growth in 2023, but it shouldn’t be worse than what we’ve had historically.”
“Yes, I’m relatively optimistic,” he added about the outlook for 2023. “I think the world is handling the economic pressure of inflation very well.”
OPEC+ began curbing supply in 2017 to tackle a supply glut that built up in 2014-2016, and OPEC is keen to ensure Russia remains part of the OPEC+ oil production deal beyond 2022, Al-Ghais said.
“We would like to extend the agreement with Russia and the other non-OPEC producers,” he said.
– This is a long-term relationship that includes broader and more comprehensive forms of communication and cooperation between 23 countries. It’s not just when it comes to production adjustment.”
