Demand will exceed supply in the next three to five years due to a lack of investment in the industry
The global market will experience oil supply shortages within the next few years due to a lack of investment in the industry, Russian Deputy Energy Minister Pavel Sorokin said on Thursday.
Oil production is now “underinvested” due to the “actions of Western countries,” he said, referring to a shift towards renewable energy that has prompted companies around the world to slash investment in hydrocarbons.
“Investments [in oil production] are now 20-25% below the pre-Covid level, which means that in three to five years we will have a fairly significant drop in new, commissioned capacities. This means that the burden will fall on the OPEC+ countries that are trying to continue to invest,” Sorokin stated.
His remarks echo forecasts by OPEC, which believes the global oil industry needs more financing as demand continues to rise due to an emphasis on energy security, even as the world moves towards renewable energy.
The alliance of oil-producing countries has said in its reports that crude is expected to retain the largest share in the global energy mix, and that the industry would require $12.1 trillion in investment by 2045 to meet global demand.
Earlier this week, Russia announced that it would extend its unilateral production cut of 500,000 barrels per day for another three months until the end of June. The move contributed to a stabilization of crude oil prices, which fell sharply last week on concerns that the Western banking crisis could weaken global energy demand.
Russia decided to voluntarily cut oil output in March in retaliation for an oil-price cap introduced by the West, which it said would eventually result in scarce supply and trigger uncertainty on the global market.