While the decreased flow of oil through the Strait of Hormuz hasn’t been as disruptive as many feared, it could still lead to lasting changes.
At the same time, demand for oil is expected to be “stickier” over the long term, while oil production could fall short in the 2030s and natural gas production is expected to trend higher, Rystad Energy executives said during the Rystad Summit in Houston on 10 September.
Rystad Deputy CEO Lars Eirik Nicolaisen said the world is likely looking more at an energy addition rather than energy transition. In recent years, he said, the world’s relationship with energy has evolved. The shale revolution delivered cheaper and more abundant hydrocarbons, followed by the Paris Agreement and the COVID-19 pandemic, both of which intensified the focus on sustainability.
“I argue US shale in and of itself drove sentiment towards the objective of providing for sustainable and decarbonized energy,” he said.
He said his assertion sounds ironic because few people associate US shale with low-carbon energy, but the abundance of oil produced by the shale revolution shifted the conversation.
“All of a sudden, we seemingly had this abundant source of oil and gas that was cheap and abundant. We stopped talking about energy scarcity, and we started talking about energy abundance,” he said.
That set the stage for a focus on sustainability. Then during COVID-19, people stopped moving in the same way as they had, he said, and energy use plummeted.
“We were falsely led to believe that, hey, look how fast we can change. This energy system that people have argued can change is so difficult to change, we just changed it. Over just weeks, we stopped using oil, or at least reduced oil consumption by a handful. And we superimposed that narrative onto this wider discussion of the energy transition to the point where we said, ‘Hey, 1.5 degrees (Celsius), net zero by 2050, maybe it’s not that difficult. Let’s make that our planning assumption,’” he said.
Many countries fashioned plans based on sustainability goals that focused on phasing out oil and natural gas use in favor of renewables, but when Russia attacked Ukraine in 2022, energy scarcity became a reality for some of those same countries.
“It’s easy now with the benefit of hindsight to look at European policies and conclude that we did not build a properly diversified energy system in Europe,” Nicolaisen said.
That was a tough lesson to learn in a crunch, he said.
“Lo and behold, here we are in September 2026, and recently (we’ve) been through—we are in—a situation that has just further underscored the imperative around reliable, secure flows of energy,” he said.
Nicolaisen said the current disruption from the ongoing semi-closure of the Strait of Hormuz hasn’t been as bad as feared, largely due to certain shock absorbers. Some oil getting through the strait or leaving the area through alternative pipeline routes has helped, he said on 10 September, one day before Saudi Arabia announced it had closed its East-West Pipeline due to drone attacks. In addition, some demand has dropped, he said, and countries have tapped their oil reserves.
Time has shown that energy situations like the current one can lead to lasting change, he said, and previous oil shocks have led to investments in energy efficiency. That could be more important than ever, given that both exploration and production take time.
“I still believe we’re going to be short oil in the ‘30s,” when Rystad forecasts the oil supply stack to decline, he said.
And that’s even as many oil and gas operators are changing their corporate strategies, shifting focus away from renewable energy and back to their roots, moves that are often prompted by activist investors, he said.
“It’s been a full 360,” he said.
It’s leading to a more pragmatic view of the energy mix, from energy transition to energy addition, he said.
Jai Singh, Rystad’s head of US oil and gas research, said the natural gas market has seen an eventful 18 months in terms of acquisitions and investments. “Players are doing interesting things,” like Mitsubishi’s $7 billion purchase of Aethon.”
And one reason, he said, is that natural gas is “not really a bridge fuel, it’s a destination fuel.”
Several companies are locking in long-term exposure to LNG, Singh said, and there’s been a rush to approve LNG projects even without contracts for the sale of product.
“We saw much more of a willingness to move to FID (final investment decision),” he said.
Demand for natural gas in the power sector is set to grow 61% by 2035 compared to the 2024 forecast, largely driven by the surge in data centers, he said.
“Yes, demand is about to explode by gas industry standards, but supply is there to meet that demand. It’s not a crisis of we will not be able to meet that demand. The question is, at what price?” he said.
