Already falling short of projected demand growth, a lack of investment in the oil industry threatens to lead to further volatility and a future energy shortfall, according to the Organization of the Petroleum Exporting Countries (OPEC).

In its 15th Annual World Oil Outlook (WOO) released Tuesday, the Saudi-led cartel said underinvestment remained one of the “great challenges” for the oil industry. This was exacerbated by the Covid-19 pandemic, with investments declining by around 30% in 2020.

The drop in capital funneling into the oil sector also comes with the big shift to renewable energy.

OPEC sees growth in renewable energy growing fastest among fuels through 2045, expanding to 36.6 million boe/d in 2045 from 6.8 million boe/d in 2020. At the higher level, renewables...