The Price of Energy Security Requires More Than Just Spending
Oil investment is geared toward declining demand, but just the opposite is happening.
Haitham al-Ghais, secretary-general of Organization of Petroleum Exporting Countries, left, greets Abdulaziz bin Salman, Saudi Arabia's energy minister, as he arrives for the OPEC+ meeting Oct. 5.
Photographer: Akos Stiller/BloombergHello and welcome to Elements, our daily energy and commodities newsletter. Bloomberg Opinion’s Javier Blas says the oil industry’s current investment strategies won’t buy energy security in a world where demand is rising. If you haven’t signed up to get Elements directly into your inbox, you can do that here.
In life, everything has a price. OPEC Secretary-General Haitham Al-Ghais was adamant about that earlier this week after the cartel cut oil production, lifting Brent crude prices toward $100 a barrel again. “Energy security has a price, as well,” he said.
Al-Ghais, a veteran Kuwaiti oil diplomat and executive, has a point. Largely focused on climate change in recent years, many European and American policymakers had forgotten about energy security.
Over the long term, energy security equals investments in oil production. The industry needs to spend billions of dollars each year to drill new wells, build pipelines and design new refineries.
Currently, oil investment is geared toward a world of stagnant, or even falling, demand — in line with climate-change goals to slash fossil-fuel emissions. The problem is that oil demand not only isn’t declining, but so far this year it’s increasing. The current path is unsustainable.
The result is that the oil market has operated at times this year close to maximum capacity. On an annual average, for example, Saudi Arabia is set to pump the most oil ever in 2022, even after the last OPEC output cut. And a world without spare oil capacity tends to see higher, and more volatile, energy prices.