Investments in Energy Sector See Biggest Drop in History
Tech. Sgt. Chenzira Mallory
Global News

Investments in Energy Sector See Biggest Drop in History

Year-on-year investment in oil and gas expected to fall by almost one-third

TLME News Service

The Covid-19 pandemic has set in motion the largest drop in global energy investment in history, with spending expected to plunge in every major sector this year – from fossil fuels to renewables – the International Energy Agency has said in a new report.

The decline is staggering in both its scale and swiftness, with serious potential implications for energy security and clean energy transitions.

At the start of 2020, global energy investment was on track for growth of around 2%, which would have been the largest annual rise in spending in six years.

But after the Covid-19 crisis brought large swathes of the world economy to a standstill in a matter of months, global investment is now expected to plummet by 20%, or almost $400 billion, compared with last year, according to the IEA’s World Energy Investment 2020 report.

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Dr Fatih Birol, the IEA’s Executive Director says: “The historic plunge in global energy investment is deeply troubling for many reasons. It means lost jobs and economic opportunities today, as well as lost energy supply that we might well need tomorrow once the economy recovers.

"The slowdown in spending on key clean energy technologies also risks undermining the much-needed transition to more resilient and sustainable energy systems.”

Global investment in oil and gas is expected to fall by almost one-third in 2020. The shale industry was already under pressure, is expecting to see a fall of 50% in 2020.

At the same time, many national oil companies are now desperately short of funding.

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For oil markets, if investment stays at 2020 levels then this would reduce the previously-expected level of supply in 2025 by almost 9 million barrels a day, creating a clear risk of tighter markets if demand starts to move back towards its pre-crisis trajectory.

The World Energy Investment 2020 report’s assessment of trends so far this year is based on the latest available investment data and announcements by governments and companies as of mid-May, tracking of progress on individual projects, interviews with leading industry figures and investors, and the most recent analysis from across the IEA.

A combination of falling demand, lower prices and a rise in cases of non-payment of bills means that energy revenues going to governments and industry are set to fall by well over $1 trillion in 2020, according to the report.

Oil accounts for most of this decline as, for the first time, global consumer spending on oil is set to fall below the amount spent on electricity.

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