Oil giants betting on long-term crude demand

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Unfazed by short-term oversupply in the oil and gas market, based on expectations for growth in global crude oil demand, oil giants are betting on long-term demand for crude oil. They believe that although the oil and gas market faces oversupply challenges in the short term, demand for crude oil will remain strong in the long run, and investments in upstream oil and gas activities are necessary to meet this long-term demand. Therefore, despite weak crude oil prices this year and global supply growth continuing to outpace demand growth, major international oil companies are still increasing production significantly in order to meet the rising demand for crude oil over the next decade. 　　Recently, oil giants have ignored concerns over short-term supply-demand imbalances and chosen to increase investment in oil and gas to meet strong demand that is expected to persist at least until around 2035. Contrary to the International Energy Agency’s (IEA) prediction, reiterated this year, that oil demand will peak by 2030, oil giants generally believe that no peak in demand will occur before that year. BP predicted last year that global oil demand would peak as early as this year, but in its updated \"Energy Outlook\" released last month it abandoned this view, arguing instead that due to energy efficiency improvements falling short of expectations, oil demand will continue to rise until 2030. Most oil and gas companies have pushed the peak demand for oil and gas back to 2040, but none have predicted a rapid decline thereafter, emphasizing that oil and gas will remain the core energy source for global economic growth by 2050. 　　ExxonMobil states clearly in its ‘Global Outlook 2025’: ‘Oil and gas are irreplaceable; they are the only viable solution to meet global energy demands.’ ”This American giant predicts that \"by 2050, oil and gas will still account for more than half of the world’s energy supply; demand will stabilize after 2030 and remain above 100 million barrels per day until 2050.\" All major credible prediction models indicate that oil and gas will remain dominant by 2050. ”　　All three scenarios in Shell’s \"2025 Energy Security Scenario Analysis\" indicate that, as the natural decline rate of oil and gas fields is 2 to 3 times higher than the potential reduction in future demand, upstream investments of around $600 billion per year will be necessary over the coming decades. 　　Artificial intelligence is also receiving attention. Market experts point out that for the energy industry, artificial intelligence appears to be a wave of general growth that should drive development in all areas of energy. In this era of unprecedented change, to strengthen the barriers to energy security, policymakers and businesses around the world are adopting an \"all-encompassing\" energy strategy, even at the cost of putting aside commitments to clean energy. Governments around the world are rushing to approve new projects in an effort to increase energy production and address the impending energy shortage. 　　However, the capital inflows brought to international oil giants by the artificial intelligence boom are not yet sufficient to offset the short-term challenges facing the industry. The Economist noted: “Since the beginning of last year, the total return (including dividends) for the components of the S&P 500 index (large American companies) has been 46%” ； In contrast, U.S. oil and gas companies, including giants such as Chevron and ExxonMobil, achieved a total return of only 14%. ”The AI boom will not enable companies to benefit in the short term. Yet even so, oil and gas companies are still investing in the consumer energy demand for artificial intelligence. 　　Oil and gas companies also have a need to utilize new production capacity to offset natural decline. Currently, ExxonMobil and other European giants are adopting a long-term strategy to offset the decline in production resulting from the accelerated degradation of existing oil and gas fields by investing in new sources of oil and gas. The International Energy Agency also made a significant shift in stance last month: with the accelerated decline of existing oil fields, developing new resources is necessary just to maintain current production levels. This contrasts with its 2021 claim that \"a net-zero scenario by 2050 requires no additional investment\"******. Exploration activities have returned to the top of oil giants’ agendas, with oil and gas companies confident about demand over the next few decades. Even though severe overcapacity is expected to occur from late this year to early next year, the supermajors continue to push ahead with their production increase plans. They are cutting costs by laying off thousands of employees (to ensure returns for shareholders at $60 per barrel oil prices), committing to billion-dollar cost-cutting plans, and streamlining their organizational structure. 　　Analysts note that current increases in oil and gas production have partially offset the impact of weak prices, while plans to increase production will enable these giants to take the lead in recovering profits once supply surpluses ease over the next year or so. Barclays analyst Betty Jiang told *** this week: “New supply is squeezing OPEC’s idle capacity.” Whether the supply-demand balance is achieved in the second half of 2026 or in 2027, the oil and gas market will eventually recover; it’s just a matter of time. ”