Global Energy Investment Up for First Time in Three Years

Despite the trade war between China and the US ramping up in the last week, oil prices have remained relatively stable since the beginning of the month.

The current price of Brent crude is US$71.76 per barrel, down slightly from US$72.18 on May 1. Although the price of Brent crude has firmly trended higher since hitting a low of US$50.77 on Christmas day 2018, it is still well below its June 2014 high of US$102.28.

Comparatively, the price of West Texas crude is US$61.97 per barrel, down by US$4.33 from its April high of US$66.30.

While oil and gas still reign supreme in the energy sector, a recent report by the International Energy Agency (IEA) notes that while, “global energy investment has stabilized, this was the third year in a row the power sector attracted more investment than the oil and gas industry.”

Worldwide investment in the energy sector surpassed US$1.8 trillion in 2018, ending three years of consecutive declines.

China continues to be the investment hub of choice, with America edging higher thanks in part to more spending on upstream supply, particularly in the shale extraction and electricity generation sectors.

Although investment is up year-over-year, the IEA reports that there are few indications that that there has been or will be a significant capital reallocation towards energy efficiency and accessing cleaner energy supplies.

There was bad news for the oil and gas sector as well, with a global reduction in new conventional oil and gas projects. The current level of oil and gas exploration and project development is well below what is needed to meet the increasing energy demand across the globe.

“Energy investments now face unprecedented uncertainties, with shifts in markets, policies and technologies,” Fatih Birol, executive director of the IEA, says in the report.

“But the bottom line is that the world is not investing enough in traditional elements of supply to maintain today’s consumption patterns, nor is it investing enough in cleaner energy technologies to change course. Whichever way you look, we are storing up risks for the future.”

The report grimly notes that there is also a broadening gap between current energy demand trends and the goals set forth in the Paris Agreement.

“The continuing investments in coal plants, which have a long lifecycle, appear to be aimed at filling a growing gap between soaring demand for power and a levelling off of expected generation from low-carbon investments (renewables and nuclear),” it reads.

“Without carbon capture technology or incentives for earlier retirements, coal power and the high CO2 emissions it produces would remain part of the global energy system for many years to come.”

In order to keep pace with the Paris Agreement and other sustainability goals, there needs to increased investment in energy efficiency and a doubling of spending on renewable power generation by 2030.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.