The oil ministers of Saudi Arabia and the United Arab Emirates warned that spare capacity is decreasing in all energy sectors as producers slash investment, causing everything from crude to diesel and natural gas to trade at or near record highs.
“I am a dinosaur, but I have never seen these things,” Saudi minister Prince Abdulaziz bin Salman, who’s been attending OPEC meetings since the 1980s, said Tuesday at a conference in Abu Dhabi, referring to the surge in prices for refined products. “The world needs to wake up to an existing reality. The world is running out of energy capacity at all levels.”
The comments came as U.S. gasoline pump prices rose to a record. Those for diesel did so in March.
The prince’s UAE counterpart, Suhail al Mazrouei, said that without more investment across the globe, OPEC+ wouldn’t be able to guarantee sufficient supplies of oil when demand fully recovers from the coronavirus pandemic.
“We’ve been warning about the lack of investment,” he said in an interview, also in Abu Dhabi. “That lack of investment is catching up with a lot of countries.”
Saudi Arabia and the UAE are among the few producers investing in greater output. They’re spending billions of dollars to raise their crude capacity by 2 million barrels a day between them by the end of this decade. Most others are struggling to get funding as shareholders and governments encourage a shift from fossil fuels to renewable energy.
Still, for now the oil market’s balanced and there is no need for OPEC+ to accelerate its gradual production increases, according to Mazrouei.
Many governments in importing nations disagree. The Organization of Petroleum Exporting Countries and its partners, a 23-nation group led by the Saudis and Russia, has been under pressure from the U.S., Europe and Japan to boost supply more quickly.
Crude has jumped more than 35% this year to around $105 a barrel, mostly due to Russia’s invasion of Ukraine in late February. The European Union is moving closer to a formal ban on Russian energy imports in a bid to punish Moscow for the war.
OPEC+ rubber-stamped a 432,000 barrel-a-day increase for June at its last meeting on May 5. It’s struggling to reach even that modest monthly target, with many members pumping below their quotas.
Prince Abdulaziz reiterated that OPEC+ would not allow geopolitics to affect its decisions. The U.S. has tried to get Saudi Arabia and the UAE to distance themselves from Russia since the attack on Ukraine.
Mazrouei said prices had been pushed up by the “politicization” of the oil market. He also said OPEC+ was unified and no member would break ranks by hiking output on its own.
“We are together,” he said. “Trust me. No one can unilaterally increase production unless they’re intending to break the alliance.”
The UAE minister said it was wrong to single out crude oil and that high taxes in consuming nations were also to blame for fuel prices soaring.
“We are getting a fraction of what the companies and governments are making from those extra taxes,” he said.