UAE: Energy ministers warn of possible oil shortage due to lack of investment

The world is running out of energy capacity at all levels and lack of investment could lead to a potential oil shortage in future, top ministers of Saudi Arabia and the UAE – both major OPEC producers, warned in Abu Dhabi.

“The world needs to wake up to an existing reality. The world is running out of energy capacity at all levels. This is a reality. It’s not our (OPEC+) making,” Prince Abdulaziz bin Salman Al Saud, Minister of Energy, Saudi Arabia, said during the World Utilities Congress.

Prince Abdulaziz pointed out that there was a wide gap between prices of crude oil and that of jet fuel, diesel and gasoline because of lack of investment in refining capacity.

“What is truly mindboggling and almost frustrating is why people are so focused on crude oil prices. Look at the differentials between diesel, jet fuel, gasoline; look at the refinery margins now $40, $50, $60. Well, I am a dinosaur, unfortunately, but I have never seen these things ever.”

On Tuesday, retail gasoline prices in the US hit another all-time record, surpassing one set in March. The average cost of a retail gallon of gasoline reached $4.374 early on Tuesday, surpassing the former record of $4.331. Since March 30, Brent crude futures have lost 7 per cent, but gasoline futures are up 9.4 per cent.

Prince Abdulaziz expressed concern about the sustainability of the energy system all together.

“We need a sustainable energy system to enable us rather than inhibit us from reaching our own prosperity and sustainability targets,” he stressed during the ministerial session.

Meanwhile, Suhail Mohamed Al Mazrouei, Minister of Energy and Infrastructure, UAE, noted that the market is being constantly monitored and oil production increased as required.

“When we look at the numbers, we look at the supply and demand, we see it balanced. The political issue that causes this chaos is something that is outside of what we discuss. We are not siding with anyone. But we are warning that if we, especially at this time where the supply in many countries have got caught up with the lack of investments, and we are seeing countries even within OPEC+ not being able to produce what they used to produce two years ago, that, I think, can be an alarming sign for all of us.”

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Al Mazrouei said that currently there were no shortage issues but called for investments to avoid one in the future.

“When it comes to balance, we don’t see any shortage, but again, we cannot guarantee that the shortage is not going to happen in the future. Definitely when demand recovers fully, we could see potential shortage if we’re not investing,” Al Mazrouei added.

On Tuesday, oil prices fell in volatile trade as the market balanced impending European Union sanctions on Russian oil with demand concerns related to coronavirus lockdowns in China, a strong dollar and growing recession risks.

Asked about the Russia-Ukraine crisis, Prince Abdulaziz added: “Russian issue is European. We leave politics out of OPEC building.”

On Tuesday, Brent crude was down 61 cents, or 0.5 per cent, at $105.33 a barrel, while US West Texas Intermediate crude fell 50 cents, or 0.4 per cent, to $102.59 a barrel.

• Abu Dhabi