While U.S. President Joe Biden preaches a net-zero emissions goal for 2050 to slow global warming, and activist shareholders force Exxon Mobil Corp. to embrace solar and wind power, Saudi Arabia sees a bright future for what it knows how to do best: pumping oil.
Let others indulge their fantasies that alternative fuels can nullify the need for new investment in petroleum supplies, said Saudi Energy Minister Prince Abdulaziz bin Salman. Asked about a report by the International Energy Agency that made such a recommendation, the 61-year-old royal was ready with a snappy comeback. “I believe it is a sequel to the La La Land movie,” he said at the online OPEC+ press conference on June 1. “Why should I take it seriously?”
Prince Abdulaziz, who brings his message to Wall Street this week at the JP Morgan/Robin Hood investors conference, is not alone in warning that the pressure to shift away from fossil fuels is getting ahead of itself. While U.S. and European oil majors and other energy companies are busy selling off assets to comply with decarbonization mandates, global demand for fossil fuels continues to rise—especially in China and India, the world’s most populous countries. This leaves national oil companies such as Saudi Aramco with the opportunity to reclaim market power, earn vast profits, and shift the center of oil and gas production back to OPEC.
It also points to the potential for a new energy crisis in the West. In the United State, the shale revolution’s boom days appear to be in the rear-view mirror. Fracking companies, such as Devon Energy and Occidental Petroleum, are now more concerned with paying down debt than drilling new wells. They are fearful of shelling out cash to expand now that the Biden administration has frozen permits for new wells on federal land. As a result, the United States is back to being a net importer of petroleum, including crude oil and petroleum products such as gasoline, after finally becoming a net exporter in 2020. Oil and gasoline prices are almost at six-year highs.