Can OPEC survive the energy transition?

Al-Monitor Pro Members

Kate Dourian

Non-resident fellow at the Arab Gulf States Institute

April 25, 2024

Since the end of the COP28 climate summit in Dubai, where all parties agreed to “transition away from fossil fuels” OPEC and lead producer Saudi Arabia have gone on the offensive. Saudi Aramco CEO Amin Nasser, speaking at the CERAWeek conference in Houston on March 18, labeled as “fantasy” the idea that oil and gas could be phased out. He dismissed suggestions that demand for hydrocarbons would peak by 2030, an apparent reference to the International Energy Agency’s predictions that demand would peak before the end of the decade as carbon intensive fuels are replaced by cleaner energy sources. Nasser noted that the share of hydrocarbons in the energy system fell by just 3% in the 21st century and today makes up 80% while “alternatives” account for 4%. Oil demand, which has risen by 100 million barrels per day in the last two decades, is set to reach a new record in the second half of the year, he added. Because Aramco is majority owned by the Saudi state, it’s fair to assume that Nasser’s remarks reflect official thinking. A few days earlier, OPEC’s Secretary General Haitham Al Ghais posted an article titled “If oil disappeared tomorrow,” in which he presented an apocalyptic vision of a world without oil. His message was that without oil, all human activity would come to a halt. The article followed what was a positive assessment of OPEC’s role in stabilizing the oil market. A report by three independent analysts published by the Federal Reserve Board of the United States in January concluded that OPEC’s communications over the last two decades “is based on fundamental factors and generates a credible public signal.” However, there is still speculation as to whether OPEC and the expanded OPEC+ alliance will survive the energy transition. If the COP28 targets are met and the share of fossil fuels in the energy complex declines, will OPEC and OPEC+ become irrelevant? And can they preserve unity under pressure?