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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Saudi Arabia Slams Shortsighted Campaign Against Oil

  • Saudi Arabia has a stark warning about the dangers of underinvesting in oil. 
  • The world’s top oil exporter is cautioning that the underinvestment in oil and gas could spark a new energy crisis. 
  • “Net-zero does not mean cherrypicking, net-zero does not mean zero oil.”

The world’s top oil exporter, Saudi Arabia, has repeatedly said it wants to be the producer that will pump the very last barrel of oil. Until that time comes, the world and its growing economy will still need oil and gas, even as renewable energy capacity soars globally.

The rebound of economies after the 2020 COVID slump has shown that global oil demand is not only not declining, but it is just months away from reaching pre-pandemic levels and exceeding them.

This weekend, Saudi Arabia once again deplored the underinvestment in oil and gas and said that focusing only on renewables while campaigning against oil and gas was a mistake.    

“Net Zero Does Not Mean Zero Oil”

The insufficient investment in the oil and gas industry harms consumers, raises concerns about short-term supply shortages, and creates challenges for policymakers, Saudi Energy Minister Prince Abdulaziz bin Salman said at the 2022 International Petroleum Technology Conference (IPTC) in Riyadh this weekend. The campaign against oil and gas investments is shortsighted, the minister said, as carried by Arab News.

The sole focus on renewables is a mistake, said the most influential oilman of the OPEC+ coalition.

“The net-zero does not mean cherrypicking, net-zero does not mean zero oil,” he added.

Related: What “Energy Independence” Really Means For The U.S.

The sharp decline in oil and gas investments has created a danger “that the world will not be able to produce all the energy it needs to promote recovery,” Prince Abdulaziz bin Salman said at the conference, per the Saudi Press Agency.  

The Saudi minister also criticized the International Energy Agency (IEA) for its contradictory messages, from “no new investment ever again” last year to calls last week for more investment in oil and gas amid the current energy crisis and soaring oil prices.  

Saudi Arabia Boosts Oil Production Capacity

While the supermajors and U.S. shale are not racing to invest in new supply, Saudi Arabia plans to raise its crude oil production capacity by 1 million barrels per day (bpd) within five years. Saudi Arabia’s oil giant Aramco targets to increase its oil production capacity to 13 million barrels per day by 2027 from 12 million bpd now.

“We are targeting our production capacity to become 13.4, 13.5 million barrels a day by 2027,” Prince Abdulaziz Bin Salman told TIME’s Vivienne Walt in an interview published earlier this month.

“We believe oil consumption will continue to grow. The demand for oil will continue growing. At what level, I do not know, because the jury is out. Anyone who tells you that they have a good grasp of where and when and how much is certainly living in a fantasy land,” he said.

So, Saudi Arabia and its state oil giant Aramco are doubling down on oil, expecting robust global demand. The world’s top oil exporter is doing its part in ensuring oil production capacity for later this decade when chronic underinvestment in oil will have impacted supply already.

“We intend to remain the world’s top producer,” Yasir Othman Al-Rumayyan, Chairman of Saudi Aramco’s Board of Directors and the Governor of the Public Investment Fund, said at the same conference in Riyadh this weekend.

Renewable energy sources depend on materials that can only be produced with hydrocarbons, Al-Rumayyan said, noting the steel, diesel trucks, and resin-coated blades inputs in building, transporting, and erecting a wind turbine, for example. 

“So make no mistake, oil and gas are part of this transition. We have a vital role to play. And we intend to be in business for a very long time,” Aramco’s chairman said.

“It’s often assumed that the only thing holding back a net-zero future is a lack of ambition. That’s wrong. Our industry has ambition in abundance. The truth is that there are still some very complex technology challenges that we haven’t yet solved,” Al-Rumayyan added.

 Underinvestment Could Create Next Supply Shortage Shock

Throughout the net-zero commitments and “keep it in the ground” calls of the past few years, Saudi Arabia hasn’t changed its message to the energy industry—renewables are not enough, underinvestment in oil and gas threatens to create supply shortages, and a rushed transition will lead to increased volatility and higher energy prices.

Over the past few months, the world saw first-hand what fossil fuel shortages could be like. Government priorities turned from actions to reduce emissions in the long term to addressing the immediate energy crunch, soaring energy bills, and catering for the near-term energy security.

Global annual upstream spending needs to increase by as much as 54 percent to $542 billion if the oil market is to avert the next supply shortage shock, Moody’s said last year.

The chief executive of Saudi Aramco, Amin Nasser, said that the World Petroleum Congress in Texas in December:

“Right now, the world is facing an ever more chaotic energy transition. Several highly unrealistic scenarios and assumptions about the future of energy are clouding the picture.” 

“Energy security, economic development, and affordability imperatives are clearly not receiving enough attention. Until they are, and unless the glaring gaps in the transition strategy are fixed, the chaos will only intensify,” Saudi Aramco’s CEO noted.

Commenting on the current commodity markets, Jeff Currie, global head of commodities research at Goldman Sachs, said earlier this month that “This is a molecule crisis. We’re out of everything, I don’t care if it’s oil, gas, coal, copper, aluminum, you name it we’re out of it.” 

By Tsvetana Paraskova for Oilprice.com 

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  • Mamdouh Salameh on February 23 2022 said:
    Prince Abdulaziz bin Salman the Saudi energy minister put the blame for underinvestment in the global oil industry fairly and squarely on the environmental activists and the hapless International Energy Agency (IEA) for their calls to keep oil and gas underground describing their calls as short-sighted, misguided and disruptive. He added that underinvestment is already affecting global oil supplies, global production capacity and therefore prices.

    He lambasted the IEA’s net-zero emissions 2050 roadmap saying that net-zero does not mean zero oil. Prince Abdulaziz also criticized the IEA for its contradictory messages, from “no new investment ever again” last year to calls last week for more investment in oil and gas amid the current energy crisis and soaring oil prices. He will be most remembered in the annals of oil for mockingly dismissing the IEA’s roadmap as la-la-land.

    However, his claim that Saudi Arabia has currently an oil production capacity of 12.0 million barrels a day (mbd) which will rise to 13-5-14.5 mbd by 2027 is highly questionable.

    Saudi Arabia has never ever had a production capacity of 12.0 mbd and will never ever achieve one. Current Saudi production comes from five giant but aging and fast-depleting oilfields discovered more than 74 years ago.

    Saudi Arabia’s crude oil production peaked in 2005 at 9.60 mbd and has been in decline since then. It can at best produce 8.0-9.0 mbd including 1-2 mbd coming from oil storage.

    It is projected that by 2025 Saudi production would have dwindled to 6.81 mbd while consumption would have climbed to 4.25 mbd leaving only an estimated 2.56 mbd. for export.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • DoRight Deikins on February 23 2022 said:
    « Renewable energy sources depend on materials that can only be produced with hydrocarbons, Al-Rumayyan said, noting the steel, diesel trucks, and resin-coated blades inputs in building, transporting, and erecting a wind turbine, for example. » Dam or solar panel, as well.

    « “Energy security, economic development, and affordability imperatives are clearly not receiving enough attention. Until they are, and unless the glaring gaps in the transition strategy are fixed, the chaos will only intensify,” Amin Nasser » That chaos is the troublesome part.

    « “This is a molecule crisis. We’re out of everything, I don’t care if it’s oil, gas, coal, copper, aluminum, you name it we’re out of it.” Jeff Currie » Well not quite everything. We've plenty of hot air and pollutants emanating from Brussels and D.C. And the things that are most important, we have in bountiful supply. Just need to open your eyes.
  • independence01776 d on February 25 2022 said:
    Now that the reality is becoming clear that a rapid shift to EVs is underway, the fear level in the Oil Oligarchys is going to boil over the next couple of years. This is just the beginning. Theres a reason Putin is jumping into the Ukraine, his oil wealth is at risk and without that he doesnt have an economy to prop up after many years of scuttling any semblance of an enterprise economy. He thinks invading and expansion of Russia to years gone by is the way to retain power. Of course, it will end in failure as oil revenues start to see a steady decline, but he doesnt have much else to stand on.

    As for Saudi Arabia and the middle east, nothing is stopping investment in oil, other than those with money see the writing on the wall. Ive explained that a couple of times on here. Why would you take a risk with waning demand. The result, high prices are here to stay as that is the only way to attract any investment into oil.

    The fact US investors are now being cautious of shale is a plus for the OPEC, allows them to raise prices and take some market share. But that is a short term burst that will end soon as they ride a demand slide down that will end in loss of fundamental power they had over the global economy and the nations they control. This is going to occur over the next decade.

    Unfortunately, it is going to be tough sledding for the oil oligarchs and the war Russia has started may be just the beginning of the unrest that is coming as the world moves away from oil and the national governments dependent on it go bankrupt.

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