Saudi Arabia warns sanctions may cause energy shortages

Saudi energy minister Prince Abdulaziz bin Salman warned of future shortages in energy supplies on Saturday if countries continue employing sanctions on others, and investments in the energy sector do not pick up.

"All of these so-called sanctions, embargoes [and] the lack of investments, they all will convolute into one thing and one thing only: a lack of energy supplies of all kinds [at a time] when they are most needed," Prince Abdulaziz said at the opening of the International Association for Energy Economics (IAEE) conference in the Saudi capital, Riyadh.

In response to a question referencing Russia's ongoing invasion of Ukraine, the minister steered clear of the politics, but shared that the kingdom is working with the government in Ukraine to send liquefied petroleum gas (LPG) to the country. "We are not devoid of emotions, and we are not devoid of our humanity," he added.

The US and the European Union (EU), among other western powers, in early December introduced an embargo on Russian seaborne crude imports and a $60/bl price cap on Russian shipments. A separate EU embargo on Russian oil products is due to come in effect today. These measures are part of a wider western-led policy to limit Russia's state revenues, and with that the funds available to it to finance the ongoing war in Ukraine.

Asked about energy transition, the Saudi minister said people should be careful what they wish for because the transition will not happen at the same speed [across the globe], or at the current projected cost. "How much competition will be over the same resources [needed to drive the transition]," he asked. "Who is the owner of such resources and who is going to manage the markets of these resources? If people in the past claimed Opec as a cartel, you haven't seen the real cartel yet," he said.

Asked to share the lessons learned from energy markets dynamics in 2022, Prince Abdulaziz said the biggest lesson for others to learn was to "trust Opec+".

"We are a responsible group of countries. We do take policy issues relevant to energy and oil markets in a total silo," he said.

Opec+ ministers in October decided on a nominal 2mn b/d cut in the group's overall production ceiling from November until end of 2023, citing the potential for a recession and an uncertain outlook on Chinese oil demand. The decision resulted in increased tension at the time, particularly between Riyadh and Washington, which had been calling on Opec+ not to reduce supplies to the market.

But Opec+ ministers and delegates have said, on several occasions since then, that their October decision, coupled with their decision to rollover policy when they met in December, have helped bring balance to the market.

"If people had trusted us then, we would not have gone through the trepidations in the first two weeks after the decision was taken," the minister said. "But here we are in January, and I ask, what happened to the market?"

The Opec+ group's Joint Ministerial Monitoring Committee (JMMC), made up of key Opec+ ministers, on 1 February and reconfirmed their commitments to the group's output policy.

By Bachar Halabi