Record drop in energy investment, warns IEA

/ Energy & Power / Wednesday, 27 May 2020 07:17

The energy industry is set to suffer a record drop in investment due to the coronavirus fallout, the International Energy Agency (IEA) said, and while renewables are likely to emerge stronger than oil, any swift economic recovery could create a global fuel crunch.

In its annual report on energy investments, the IEA estimated the plunge will be of the order of one-fifth from 2019 levels, or almost $400 billion, as firms slash spending amid slumping demand for energy.

Shale oil producers stand to suffer the worst decline, the IEA said. However, spending in renewable power projects is expected to fall by only around 10 percent for the year.

"Even though this 'clean' spending is set to dip in 2020, its share in total energy investment is set to rise," it noted.

“These investment levels remain far short of what would be required to put the world on a more sustainable pathway," estimating that spending on renewable power would need to double by the late 2020s.

The IEA has long warned that insufficient investment may leave the industry unable to meet rising demand.

If oil investment stays at 2020 levels then supply in 2025 would be 9 million barrels per day less than had been expected, the IEA estimated, which could mean tight markets and higher prices.

While some may see a drop in spending on oil as a positive development, Birol warned of negative consequences.

"We hope to see a clean energy transition, this should be an orderly energy transition, well designed so it doesn't cause any crisis, any shock," he said.

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