LONDON: Even if oil consumption reaches a peak and then starts to fall, the world will still need large quantities of oil for many decades to come.
The prediction is contained in a thoughtful paper co-authored by Spencer Dale, chief economist of BP, and Bassam Fattouh, director of the Oxford Institute for Energy Studies.
“Global oil demand is likely to continue growing for a period, driven by rising prosperity in fast-growing developing economies,” they wrote in a paper published on Monday.
“But that pace of growth is likely to slow over time and eventually plateau, as efficiency improvements accelerate.”
The implication is that consumption is likely to reach a maximum at some point and then start to fall, though the timing and magnitude of the peak are highly uncertain and very sensitive to assumptions.
And even once demand has peaked, consumption is unlikely to drop sharply, the authors argue, given the inherent advantages of oil as an energy source, particularly its energy density.
“Peaking oil demand is not expected to trigger a significant discontinuity or sharp fall in demand,” they wrote.
Under most scenarios, the world will still be consuming tens of millions of barrels of oil per day through the middle of the century.
There are sufficient known oil resources to meet all the world’s oil demand through 2050 twice over, according to BP estimates.
But given the natural decline in output from existing fields, substantial investment will be needed to turn those resources into reserves and produce them.
The predicted peaking of consumption, coupled with vast resources, and new production made possible by hydraulic fracturing and horizontal drilling have transformed the long-term outlook for the oil industry.
The dominant narrative, which before 2008 was characterised by fears about future scarcity and oil supplies running out, has been transformed into one about future abundance.
Some now worry that many of those resources will never be needed and may become stranded assets — a welcome development for climate campaigners but a potential problem for oil producers.
Peak oil demand signals “a shift in paradigm: From an age of scarcity to an age of abundance, with potentially profound implications for oil markets,” according to Dale and Fattouh.
In an era of abundance, oil markets are likely to become increasingly competitive, as resource owners compete to secure market share and produce their reserves rather than risk them being left in the ground.
“Faced with the possibility that significant amounts of recoverable oil may never be extracted, low-cost producers have a strong incentive to use their comparative advantage to squeeze out high-cost producers and gain market share.”
Better to have money in the bank than leave oil in the ground.
As the oil market becomes more competitive, low-cost producers will find it more profitable to switch to a high-volume, lower price strategy — in contrast to the old strategy of restricting volumes and raising prices.
The argument applies especially to Saudi Arabia, Kuwait and Abu Dhabi.
The implication is that many producing countries will see revenues and formerly high resource rents decline, to the benefit of consumers.
In theory, competition for market share should drive oil prices down to the marginal cost of extraction, which the authors suggest could be lower than $10 per barrel for the major Middle East producers.
But these countries rely heavily on oil revenues to fund government operations, defense, healthcare, education and social safety nets. They need prices well above the marginal cost of extraction.
To be sustainable, oil prices must be high enough to cover these “social costs” as well as the much lower costs of physical extraction.
The authors cite fiscal breakeven prices as a proxy for social costs and say breakevens for five major Middle Eastern producers averaged $60 per barrel in 2016 compared with a physical cost of production of just $10.
Many low-cost producers recognize the need to diversify their economies away from dependence on oil but experience suggests such transitions take decades to complete.
In the meantime, the authors argue, many low-cost producers will try to resist the shift to a higher-volume, lower-price strategy while they try to make progress with the transition.
The problem with this argument is that it makes oil prices a function of social costs. In reality, it is the other way around — price drives social spending.
Dale and Fattouh argue that “it is likely that many low-cost producers will delay adopting a more competitive strategy until they have made significant progress in reforming their economies. This is likely to slow the speed at which the new competitive oil market emerges.”
“The shift to a more competitive oil market environment won’t just happen on its own accord, it requires a critical mass of low-cost producers both to recognize the need to adopt a more competitive strategy and, more importantly, to have reformed their economies sufficiently for them to be able to adopt such a strategy sustainably.”
If social costs in many low-cost producing countries remain high, according to Dale and Fattouh, that is likely to slow the pace at which a more competitive market takes hold, until they can reduce them.
Fattouh and Dale assume that Saudi Arabia and the other low-cost Middle East oil producers can successfully exercise market power, restricting production to keep prices high.
But they are probably overstating OPEC’s market power.
In the 1980s, OPEC’s market power was broken by the emergence of rival oil supplies from the North Sea as well as Russia, Alaska and China. In the 2010s, its market power was hit by the emergence of US shale, Canadian heavy oil and deepwater projects.
In practice, prices have been driven by the cost of developing and producing alternative supplies outside the major producing economies of the Middle East.
The cost of these alternative supplies is well above the $10 physical extraction cost of the major Middle East fields — but it may or may not be high enough to cover their social costs.
In future, the major oil producers will also have to reckon with increasing competition from other forms of energy.
Dale and Fattouh conclude that social costs and the pace of economic reform in the major oil-producing countries will have a decisive impact on oil prices over the next few decades.
In practice, the opposite is probably true. Oil prices and the degree of competition from other sources of supply, as well as electric vehicles, will have a decisive impact on the producers’ social spending and the rate of diversification.
• John Kemp is a Reuters market analyst. The views expressed are his own.
Peak oil demand and its implications for Gulf producers
Peak oil demand and its implications for Gulf producers

Closing Bell: Saudi main index slips to close at 10,714

RIYADH: Saudi Arabia’s Tadawul All Share Index slipped on Tuesday, as it shed 153.22 points or 1.41 percent to close at 10,713.82.
The total trading turnover of the benchmark index was SR4.97 billion ($1.32 billion), with 20 of the listed stocks advancing and 228 declining.
Saudi Arabia’s parallel market Nomu also shed 214.39 points to close at 26,458.24.
The MSCI Tadawul Index declined by 1.14 percent to 1,378.44.
The best-performing stock on the main market was Saudi Research and Media Group. The company’s share price increased by 6.88 percent to SR170.80.
The share price of SABIC Agri-Nutrients Co. advanced by 4.82 percent to SR108.80.
Zamil Industrial Investment Co. also saw its stock price climb by 4.71 percent to SR40.
Conversely, the stock price of media giant MBC Group Co. dropped by 6.56 percent to SR33.45.
On the announcements front, Tadawul, in a statement, said that shares of Saudi low-cost air carrier flynas will begin trading on the main market under the symbol 4264 from June 18.
The daily and static fluctuation limits for the company’s stocks will be set at 30 percent and 10 percent, respectively, during the first three days of trading.
On June 17, Saudi National Bank announced the issuance of US dollar-denominated Tier 2 debt instruments through a special purpose vehicle, targeting qualified investors both inside and outside the Kingdom.
The financial institution added that the final issuance value and offering terms will be determined based on market conditions, according to a Tadawul statement.
The minimum subscription value is $200,000, with a 10-year maturity period.
The debt instruments will be listed on the London Stock Exchange’s International Securities Market.
The share price of SNB edged up by 0.58 percent to SR34.50.
Advance International Co. for Communication and Information Technology announced that it completed the offering and subscription of SR-denominated Murabaha sukuk valued at SR6 million.
Murabaha sukuk is a financial instrument based on Islamic finance principles, offering an interest-free investment option.
In a Tadawul statement, AICTEC said that the offering aims to strengthen the company’s working capital as well as support capital expansions.
The stock price of AICTEC rose by 3.57 percent to SR2.90.
IsDB Group partners with Turkiye to drive green industrial growth

JEDDAH: The Islamic Development Bank Group has partnered with Turkiye’s Ministry of Industry and Technology to advance sustainable manufacturing and infrastructure as part of a broader push to modernize the country’s industrial zones and accelerate its green transition.
The initiative supports Turkiye’s 2053 net-zero emissions target and aligns with the 12th National Development Plan (2024–28) and the 2030 Industry and Technology Strategy.
According to the Saudi Press Agency, the project aims to cluster industrial enterprises within designated zones, reducing environmental impact and promoting climate-conscious development.
While Turkiye has committed to peak emissions by 2038 and reach net zero by 2053, independent assessments question the feasibility of this goal.
Climate Action Tracker has rated the strategy as “poor,” citing a lack of ambition and transparency, and warning that the 15-year window to net zero is overly compressed.
Still, some subsectors—such as cement, iron and steel, aluminum, and fertilizers—have set clearer reduction targets, although they remain exceptions, CAT notes.
Walid Abdelwahab, director of the IsDB Group’s regional hub in Turkiye, described the project as “a vital step in fulfilling the IsDB’s commitment to supporting sustainable industrial transformation, enhancing economic resilience, and promoting climate-conscious development.”
A multidisciplinary team from IsDB’s Jeddah headquarters and Ankara office has been working closely with various government bodies and industrial zone authorities. Discussions have focused on collecting data, identifying challenges, and shaping the project in line with national investment and climate resilience goals.
According to SPA, the initiative will also address key areas such as wastewater management, improved water use efficiency, and green infrastructure, laying the groundwork for long-term sustainable industrial growth.
Energy security key to inclusive growth, says Saudi finance minister

RIYADH: Energy security is not a luxury but “a fundamental pillar for achieving development and inclusive growth,” said Saudi Arabia’s Finance Minister Mohammed Al-Jadaan.
Delivering the opening remarks at the OPEC Fund for International Development Forum 2025 in Vienna, Al-Jadaan warned that the absence of reliable energy access undermines critical sectors, including healthcare, education, productivity, and food and water systems.
“With rising geopolitical tensions, market volatility, and surging global energy demand, it has never been more urgent to achieve a more secure and diversified energy landscape,” Al-Jadaan said.
He added: “This requires a strategic push to diversify energy sources, scale up investment in clean technologies, and adopt innovative financing solutions to accelerate energy access and strengthen long-term energy security.”
Four-point reform plan
Al-Jadaan outlined four policy recommendations for multilateral development banks aimed at boosting global energy resilience. He stressed the need to support all energy sources without bias and cautioned against emissions policies that exclude major energy contributors.
He said such policies risk destabilizing markets and disproportionately impact developing economies and vulnerable populations.
His second recommendation focused on expanding concessional financing to underserved regions. The minister praised the World Bank’s “Mission 300” initiative, which aims to provide energy access to 300 million people in Africa, and acknowledged the contributions of the Islamic Development Bank and the OPEC Fund.
Al-Jadaan also commended Saudi Arabia’s Forward7 Clean Fuel Solutions for Food initiative under the Middle East Green Initiative, which promotes clean fuel deployment globally. The program has partnered with institutions including the OPEC Fund, the World Bank, the Islamic Development Bank, and the International Islamic Trade Finance Corp.
De-risking and innovation
Al-Jadaan’s third point emphasized the need to de-risk investments in the energy sector to encourage private sector involvement.
He cited mechanisms such as partial risk guarantees, political risk insurance, and blended finance structures as essential tools to mitigate risks and enhance the feasibility of energy projects, particularly in low-income and high-risk countries.
“These tools help mitigate expected risks and enhance the bankability of energy projects, especially in low-income and high-risk countries,” the minister said.
In his final point, Al-Jadaan called for stronger investment in technologies such as carbon capture and sustainable hydrocarbon applications to reduce emissions and maintain supply during the transition to net-zero.
He underscored the far-reaching consequences of energy poverty, including economic instability, forced migration, and increased humanitarian pressures.
Al-Jadaan reaffirmed the Kingdom’s aim to generate 50 percent of electricity from renewables by 2030 and achieve net-zero emissions by 2060. These goals are being pursued under the Circular Carbon Economy framework.
“In the Kingdom of Saudi Arabia, we are working with everyone to enhance energy security and eliminate energy poverty, while continuing efforts to combat climate change,” he said.
Development crisis warning
OPEC Fund President Abdulhamid Al-Khalifa also addressed the forum, warning of a worsening global development gap.
He said the world is facing what the UN secretary-general has described as a “development emergency,” pointing out that only 18 percent of Sustainable Development Goals have made measurable progress since their inception in 2015.
“Developing countries face a $4 trillion annual funding gap, worsened by rising debt servicing costs that are draining resources from essential services,” Al-Khalifa said.
To address this, he said the OPEC Fund is ramping up efforts and leveraging momentum from previous forums. Among its recent actions, the fund has joined the “Mission 300” initiative to expand energy access.
It has also deployed $1 billion as part of its food security action plan, committed an additional $2 billion to support food supply chains in partner countries, and allocated $1 billion to combat desertification under the Arab Coordination Group's $10 billion Riyadh Global Drought Resilience Partnership.
New trade facility
Al-Khalifa also announced the launch of the OPEC Fund Trade Facility Initiative, a program designed to mobilize billions of dollars in support through 2030.
The facility aims to help countries secure strategic imports, address trade-related liquidity gaps, and strengthen resilience against external economic shocks.
“This is a direct response to an urgent need, and a reflection of our commitments to stand by our partners when it matters most,” he said.
Al-Khalifa emphasized the growing strain on trade as a development cornerstone, citing disrupted supply chains, rising costs, and foreign exchange volatility that are affecting the most vulnerable communities.
Project milestones
In 2024, the OPEC Fund committed $2.3 billion to 70 projects across the globe — a 35 percent increase compared to the previous year.
These projects connected 300,000 households to electricity, built over 500 km of roads, and supported 75,000 farmers and 35,000 women.
As the Arab Coordination Group marks its 50th anniversary this year, Al-Khalifa noted the significance of this milestone, saying the OPEC Fund is honored to stand alongside other member institutions in celebrating five decades of collaborative development efforts.
“We know from experience, when partners align their resources, expertise, and approaches, the results are transformative,” he said.
Both Al-Jadaan and Al-Khalifa stressed that global cooperation and innovation are critical to overcoming current challenges and advancing toward a future of inclusive and sustainable development.
Saudi Arabia, Panama sign air transport agreement to strengthen global connectivity

- Deal signed during 55th edition of Paris Air Show
- It reflects Kingdom’s broader efforts to expand its global aviation footprint
RIYADH: Saudi Arabia and Panama have signed a bilateral air services agreement to enhance air connectivity between the two countries and expand access to global aviation markets.
The deal was signed during the 55th edition of the Paris Air Show by Abdulaziz Al-Duailej, president of the General Authority of Civil Aviation, and establishes a regulatory framework for safe, efficient, and fair air services, according to the Saudi Press Agency.
The deal reflects the Kingdom’s broader efforts to expand its global aviation footprint in line with Vision 2030. As part of its National Aviation Strategy, the country is building international partnerships, strengthening regulatory frameworks, and increasing air connectivity to link to 250 global destinations and transport 330 million passengers annually by 2030.
The new agreement complements the 1944 Chicago Convention on International Civil Aviation, the legal foundation for global air travel. It includes provisions on traffic rights, airline designation, and licensing, as well as the enforcement of international safety and security standards.
It is also designed to promote fair competition and support the long-term commercial interests of national carriers in both countries.
The deal aims to serve the common economic interests of national carriers and enhance their participation in the air transport market by applying modern market-entry models and supporting all forms of air traffic, SPA reported.
“The organization’s participation aims to highlight the role of the civil aviation sector in the Kingdom as an important driver of the national economy, the promising investment opportunities it offers, and to learn more about the latest innovative global technologies in the sector,” the report added.
Saudi Arabia, represented by GACA, concluded its participation at the Paris Air Show with a wider range of strategic announcements aimed at bolstering its aviation sector. Key outcomes included a memorandum of understanding with Airbus on environmental sustainability and aviation safety, a leasing deal for 77 new aircraft by Avilease, and Riyadh Air’s order for 50 Airbus A350-1000 jets, increasing its future fleet to 182 aircraft in line with Vision 2030’s goal of positioning Riyadh as a global air hub.
The Saudi delegation was led by Saleh Al-Jasser, minister of transport and logistic services and chairman of GACA, accompanied by GACA president and senior executives from across the Kingdom’s aviation ecosystem. Their participation focused on strengthening partnerships with leading aerospace companies, attracting investment into the Saudi aviation sector, and advancing bilateral cooperation.
During the show, Al-Jasser and the delegation toured various pavilions showcasing innovations in advanced air mobility, aerospace, sustainability, and smart manufacturing.
They observed emerging solutions featuring high levels of automation and digitization across both commercial and military aircraft.
In addition to the MoU with Airbus, the show saw key commercial signings. Avilease, a Public Investment Fund-owned leasing firm, agreed to purchase 77 new-generation aircraft, including A350 freighters and A320 narrow-body jets. Riyadh Air confirmed an order for 50 A350-1000 aircraft, part of its plan to turn Riyadh into a global aviation hub.
A separate agreement was signed between Cluster 2 Airports Co. and Airbus to explore collaboration opportunities in training, development, and investment.
Al-Duailej also met with several global aviation leaders, including Damien Caze, director general of the French Civil Aviation Authority; Arjan Meijer, CEO of Embraer; and Bahrain’s Minister of Transportation and Telecommunications Sheikh Abdulla Al-Khalifa, to discuss regional cooperation.
The Kingdom’s presence at the Paris Air Show underscored its commitment to civil aviation as a driver of economic growth, innovation, and international connectivity. The event is one of the world’s most prominent in the aerospace industry, attracting thousands of participants and showcasing the latest in aviation, defense, and space technologies.
SIC, Investindustrial forge alliance to drive Saudi industrial expansion

RIYADH: SIDF Investment Co., the financial arm of the Saudi Industrial Development Fund, has entered into a strategic partnership with European private equity firm Investindustrial, marking its first international private equity commitment.
The agreement is aimed at catalyzing new industrial investments in the Kingdom by localizing advanced manufacturing and integrating Saudi small and medium-sized enterprises into Investindustrial’s global value chains.
The partnership is a significant milestone for SIC as it broadens its international engagement and supports Saudi Arabia’s Vision 2030 objectives. These include attracting institutional capital, localizing industrial expertise, and contributing to the National Industrial Strategy, which targets increasing the number of factories to 36,000 by 2035.
The announcement follows a previous agreement in March between SIC and Ashmore Investment Saudi Arabia to launch a private closed-end industrial fund. The SR400 million ($106.6 million) initiative — the first of its kind in the Kingdom — is managed by a global asset manager and aims to support a wide array of industrial assets. That move laid the foundation for SIC’s private equity strategy to stimulate domestic investment and expand global partnerships.
“This agreement represents a new chapter for SIC,” said Fahad Al-Naeem, CEO of SIC. “By partnering with Investindustrial, we’re bridging global reach, operational depth, and industry specialization into our ecosystem, positioning Saudi Arabia as the platform for regional and international manufacturing growth.”
The targeted sectors include machinery and equipment, automation, medical devices, and sustainable consumer products, with an emphasis on local value creation and industrial innovation.
This move comes as the Kingdom ramps up efforts to strengthen its industrial base and draw international investment into strategic sectors. In April, Saudi Arabia’s Industrial Production Index rose 3.1 percent year on year, led by gains in manufacturing and mining. Manufacturing activity alone climbed 7.4 percent annually, with a 0.5 percent uptick month on month.
Adding to this momentum, the government launched the Standard Incentives for the Industrial Sector program in May, offering up to 35 percent financing on initial capital expenditure per project, capped at SR50 million. The initiative supports facility development and operations over a seven-year term.
“SIC will utilize its local market expertise to pave the way for global manufacturers to establish a footprint in Saudi Arabia and connect with international supply chains, benefiting from the Kingdom’s competitive position,” Al-Naeem added.
Investindustrial, which has raised €17 billion and operates across eight global offices, focuses on mid-market companies with a mission to drive sustainable value creation and support global expansion.
“The Kingdom of Saudi Arabia has emerged as a key strategic growth region for Investindustrial’s portfolio companies,” said Andrea Bonomi, chairman of Investindustrial.
“Many of our investments align closely with the goals of Saudi Arabia’s Vision 2030, fostering strong and natural synergies for long-term value creation,” Bonomi added.
The signing ceremony was attended by Prince Sultan bin Khaled, vice chairman of SIC, and Italy’s Ambassador to Saudi Arabia, Carlo Baldocci, reflecting the high-level support backing the agreement.
The deal further advances SIC’s role as a gateway for institutional-grade industrial investment into Saudi Arabia, reinforcing its mandate to help build a globally competitive and resilient manufacturing sector.