Demand and continuation: energy consumption will grow by 23% by 2050%

By 2050, global energy consumption will increase by 23% due to population growth. This was stated at the Russian Energy Week (REN) by OPEC Secretary General Haytham al-Gais. To reduce risks, it is necessary to increase investment in the industry, said Deputy Prime Minister Alexander Novak. According to OPEC estimates, the oil industry will need investments of $18.2 trillion by 2050. Underfunding can lead to price increases of up to $100-150 per barrel, experts say. What else did the participants of the main international REN session talk about and what the future holds for the global energy market — in the Izvestia article.

What challenges can the global oil industry face?

Global demand for all types of energy resources and the future of the global market were discussed at the central session of the first day of the Russian Energy Week (REN). The participants, representatives of the largest oil and gas exporting countries, heads of global energy alliances, as well as guests from friendly European countries, agreed that the sustainability of global energy depends on the ability to maintain a balance between climate goals and the real capabilities of the industry.

According to Russian Deputy Prime Minister Alexander Novak, global energy demand is growing faster than the economy as a whole.

— The demand for electricity increased by 4.3% last year, which is higher than the average growth rate of the global economy of 3%. This trend will continue due to the development of computing technologies, electric transport and artificial intelligence," the official said.

At the same time, according to him, traditional energy sources continue to dominate.

— We see an increase in oil demand — in 2024, the increase amounted to 1.3 million barrels per day, and this year we expect similar figures. The gas industry is also showing strong performance: consumption increased by 2.8%, mainly due to the countries of the Asia-Pacific region. Interestingly, despite the talk about the "decline of coal," its global consumption increased by 1.8%," the Deputy Prime Minister stressed.

At the same time, according to Alexander Novak, the global oil industry is currently facing a lack of investment, which in the future may lead to a shortage of supply.

— There are risks of underinvestment in the energy sector, in particular, in the oil industry. And today, even the International Energy Agency said that we need to return to investing, otherwise we may get risks in the near future that consumption will outstrip supply. As a result, there may be an imbalance in the market," he said.

OPEC Secretary General Haitham al-Ghaith also spoke about the need to increase investments in global energy, including oil and gas. Speaking at the forum, he warned that the ideology aimed at ending the financing of the industry could lead to a sharp increase in energy prices.

According to his estimates, by 2050 the world's population will grow to 10 billion people (from 8.25 billion, according to Population Today). This means that demand will grow by 23%, and oil will retain a share of over 30% in the global energy mix.

— We will need more investments in the energy sector in general. And this is our message to OPEC. Despite all the so-called turbulence that we are witnessing in the world, we are still focused on irrefutable facts and data that give us one clear message," he said.

Haytham Al-Gais noted that OPEC focuses on facts and data in its work, ignoring extraneous "information noise." According to him, the organization is not engaged in politics, but is focused on market stability. At the same time, he noted that the talks about the complete abandonment of hydrocarbons, proclaimed by the Paris Agreement of 2015, turned out to be far from reality.

— Everyone loves the term "energy transfer". What does this mean? A few years ago, we discussed the importance of green energy, but even those who talked about it are backing down and admit that more investments in oil and gas are needed. We must not forget the importance of consistency in our plans. This is an industry where investments are required steadily," he concluded, calling for a sober approach and abandoning energy illusions.

In turn, Mohamed Hamel, Secretary General of the Gas Exporting Countries Forum (GECF), said that by 2050, global demand for natural gas will grow by 32%, and its share in the energy mix will increase from 23% to 26%.

"The golden era of natural gas is ahead," he said.

Why there was an imbalance in investments

It is worth recalling that the International Energy Agency (IEA) has been advocating for increased investments in renewable energy for the past ten years and predicted a peak in global oil consumption in 2030.

At the same time, the oil cartel members constantly criticized the IEA for underestimating the demand for fossil fuels, emphasizing that this would lead to lower investment in production and the inability to meet the still growing demand.

However, this year the energy agency changed its narrative and stated the need to pay attention in the analysis not only to estimates of demand, but also supply, predicting that "without increasing investments in existing fields, the world will lose annually the volume of oil production equivalent to the total production of Norway and Brazil."

The new IEA report "Consequences of the rate of decline in oil and gas production" analyzed production data from about 15 thousand fields. It turned out that almost 90% of annual mining investments are directed to compensate for the decline, rather than to increase production.

"The rate of decline in production is the elephant in the room in any discussion of oil and gas investment needs, and our new analysis shows that they have accelerated in recent years," said Fatih Birol, Executive Director of the IEA.

In the industry, the cessation of new production investments would deprive the global supply of 5.5 million barrels per day annually, compared with just under 4 million barrels in 2010. The rate of decline in natural gas production has also worsened, increasing from 180 billion cubic meters. up to 270 billion cubic meters per year .

In turn, OPEC noted this year that the oil industry will need investments of $18.2 trillion by 2050. And the cartel's secretary general, Haitham al-Ghaith, said that the ideology of undermining investments was useless.

— It will only create an era of rising oil prices, as well as energy prices in general. We are already seeing signs of this in Europe. Take the UK, for example: people can't pay their electricity bills in many cases because everything is very expensive and it's not oil. They use gas, coal, and many renewable energy sources," the OPEC Secretary General noted.

What will happen to oil prices

According to Valery Andrianov, an associate professor at the Financial University under the Government of the Russian Federation, underfunding the oil industry can lead to price increases of up to $100 per barrel and even higher.

— There are also higher estimates — up to $150 per barrel. However, much will depend not only on the volume of investments, but also on other facts. First of all, we are talking about the dynamics of demand for "black gold". Estimates show that it will grow at least in the short term. But at the same time, the question remains about the pace of such growth and its main drivers," the Izvestia interlocutor believes.

According to him, the geopolitical factor will also play a role. The expert stressed that in the event of increased international tension, in particular, the outbreak of a large-scale war in the Middle East, prices could rise to $150 even with increased investment. In addition, he believes that "the technological factor cannot be discounted — the development of technologies reduces the cost of exploration and production of energy resources, which, accordingly, reduces investments."

"The underfunding of the industry is certainly an alarming factor, and if the world wants to avoid energy shortages and exacerbate energy poverty, it is necessary to increase investments in existing and promising projects for the development of traditional types of energy resources," the analyst believes.

In turn, Dmitry Scriabin, portfolio manager at Alfa Capital Management Company, believes that any forecasts on the horizon up to 2050 should be treated with a grain of salt.

— During this time, technological progress is able to radically change the landscape of global energy. Active research is already underway in the field of alternative energy sources — hydrogen, thermonuclear fusion, and energy storage systems. If these technologies reach the industrial level, the dependence of the global economy on oil may decrease significantly, and with it the need for large—scale investments in production, the expert believes.

Nevertheless, according to Olga Orlova, head of the Industry department at the Institute of Oil and Gas Technologies, the world cannot now reason at the "if" level — all this is based on risks. In addition, there are certain trends, such as population growth and the pace of economic development in Asia and Africa. And even the IEA, the main advocate of the "green transition," has started talking about the need to increase investments in oil and gas. However, this process should be organic, without any excesses towards one or another energy carrier, the expert added.