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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Why The World Needs To Invest In Fossil Fuels

  • The CEO of Saudi Aramco made headlines this week when he once again highlighted the need for more investment in oil and natural gas.
  • A recent report from Rystad shows that oil and gas exploration could fall towards all-time lows despite the desperate need for energy around the world.
  • Meanwhile, the secretary-general of the United Nations struck out at the oil industry for feasting on billions in subsidies while our planet burns.
Fossil Fuels

The Chief Executive of Saudi Aramco was clear in his recent speech when he outlined the main reasons for the current energy crisis. He pointed to underinvestment in oil and gas, a dearth of alternative energy sources, and a complete lack of any Plan B. Looking forward, it seems unlikely that those problems will be solved anytime soon.

Saudi Arabia has been blaming underinvestment in oil and gas exploration for the energy crunch for months. As one of the world's biggest oil producers, its opinions on energy security have been politely but firmly dismissed as the European Union and its G7 partners forged ahead with their energy transition plans. And now that chickens are coming home to roost for the transition planners, the race is on for these countries to secure as much oil, gas, and coal as they can.

The problem with this approach is that while Europe and its partners were pushing for a transition away from oil, gas, and coal, the industry was listening. Investments are down, and so is exploration, according to a recent report by Rystad Energy. The energy consultancy said that the new acreage awarded to oil and gas companies this year had shrunk to the lowest in 20 years and that lease rounds for the year are going to be the fewest since 2000.

"Global spending on exploration has been falling in recent years as oil and gas companies seek to limit risk by focusing on core producing assets and regions with guaranteed output, aiming to streamline their operations and build a more resilient business amid market uncertainty and the threat of a recession," Rystad analysts wrote,

"These are the real causes of this state of energy insecurity: under-investment in oil and gas; alternatives not ready; and no back-up plan. But you would not know that from the response so far," said Aramco's Amin Nasser at the Schlumberger Digital Forum 2022 in Switzerland this week.

Meanwhile, the secretary-general of the United Nations, Antonio Guterres, struck at the oil industry once again, accusing it of "feasting" on billions in subsidies and enjoying windfall profits while "our planet burns."

"Our world is addicted to fossil fuels. It's time for an intervention," Guterres said, adding that we need to hold fossil fuel companies "and their enablers" to account. The accounting, according to him, should come in the form of windfall profits, to be distributed among those most affected by climate change by those struggling with energy and food inflation.

While Guterres' accusations toward the oil and gas industry are quite emotional as statements go, it is true that the industry has seen a boost in financial support, according to the International Energy Agency.

In a report last month, co-authored with the OECD, the IEA said that "Major economies sharply increased support for the production and consumption of coal, oil and natural gas, with many countries struggling to balance longstanding pledges to phase out inefficient fossil fuel subsidies with efforts to protect households from surging energy prices."

If the IEA had asked Aramco's Nasser why this might be, he would have probably had an answer ready: because these countries have realized the importance of energy security and why it is more important than transition goals. Alas, the IEA did not ask the Aramco CEO to share his opinion on the situation.

It is also doubtful whether agenda-setters and decision-makers in European capitals and in Washington will hear Nasser's latest warning even as they seek to improve their oil and gas—and coal—supply. To them, the leitmotif of this return to fossil fuels is that it is a temporary measure, just while the crisis lasts. What they appear to be failing to grasp is that the crisis could last a while.

Of course, excessive energy prices will lead to demand destruction. This has always been the case, and this crisis will be no exception. The problem is that with demand, a lot more will be destroyed if it comes to that. Some are already talking about Europe's looming deindustrialization because of the energy crisis.

Indeed, aluminum smelters, steel mills, fertilizer plants, and farms have been shutting down across the EU because they cannot afford to keep operating at these energy prices. Governments have pledged support, but the question of how much they can provide in support and for how long remains open.

Many analysts have pointed out that the current crisis in Europe had its roots much further back in time than February 24, when Russia invaded Ukraine. This fact tends to get swept under the rug of political outrage because it is an uncomfortable fact.


Europe has for years been walking the transition tightrope without a safety net. Now that the rope is fraying, it may be too late to try and get the net back. At least fast enough to survive the fall.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on September 22 2022 said:
    No one is against renewable energy increasing its share in global electricity generation even at the expense of natural gas and coal. But heeding the following realities in the global energy markets is even more important for the survival of the global economy and the wellbeing of mankind.

    1- A post-oil era is a myth. It isn’t going to materialize throughout the 21st century and probably far beyond. The reason is that the world can’t expect to find an alternative to oil as versatile and practicable as oil itself in the next 100 years from now.

    2- A full global energy transition from fossil fuels to renewables is an illusion. It will never happen in 2050 or 2100 or ever. Even a partial transition could only succeed with major contributions from gas and to some extent coal and nuclear energy.

    3- Renewables on their own can never satisfy global energy electricity needs because of their intermittent nature: no solar electricity when it is cloudy and no wind electricity either when the wind is still.

    4- The global economy will continue to be driven principally by oil and gas well into the future. In a nutshell, there can neither be a sustainable global economy nor a civilization like the one we love and enjoy currently without oil and gas.

    5- Therefore, a considerable and regular investment in in oil and gas production capacity is quintessential for the survival of the global economy and humanity as well as for global energy security.
    6- Producing oilfields of the world are depleting at an estimated average annual rate of 6%. Therefore, any expansion of production should allow for this fact meaning that if the world needs 100 million barrels a day (mbd) today, production expansion should aim to produce 106 mbd followed by the same rate the year after.

    Meanwhile, the secretary-general of the United Nations, Antonio Guterres, gets emotional when he tells us that our world is addicted to fossil fuels and that it is time for intervention.

    However, emotions are not what the global economy needs to survive. It needs huge investments in oil and gas and this should continue until we find alternatives to oil and gas. This in my professional opinion isn’t going to happen in the next 100 years.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert
  • Ken Towe on September 22 2022 said:
    It should be obvious, but apparently isn't, is that we cannot continue to make the transition to renewables and electric transportation without using conventional vehicles that run on oil and gasoline, diesel and biofuels. The fact that the UN leadership cannot see this is disturbing.

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