Where Energy Will Come From in the Future

The chart below offers an excellent summary of the changes in energy supply by tracking investments in different sectors:

Notice that oil, gas, and coal investments are now declining, while the renewable energy investments are increasing.  This decline in oil and gas investments is even more obvious from this chart:

While this might look like a good thing at the moment, it is worth remembering that the majority of energy we consume still comes from fossil fuels.  And this energy powers our daily lives.

One possible scenario for the near future is that the demand for oil and gas will go up again, and the industry will be unable to meet this demand (due to low investments today), which will slow the industrial growth and bring oil&gas prices back to their historical heights.

The plot below (from Bloomberg) shows the impact of low investments on the rate of oil exploration. To summarize, there is not much oil available for us right now if we need it:

As this report suggests:

Meanwhile, even as renewables are playing a larger and ever-expanding role in global electricity markets, oil still dominates the transportation sector, and will continue to do so for some time. Spending on exploration and production has been savagely cut because of low oil prices, which could ultimately lead to a much tighter oil market in the future. New sources of supply cannot turn on a dime. The IEA has sounded the alarms on a supply shortfall in the future. With the speed and scale of spending reductions happening at a dizzying pace and the subsequent loss of human capital also occurring, the industry will likely be flat-footed when oil prices rebound. Moreover, upstream oil and gas investment is now “increasingly concentrated in regions exposed to geopolitical and security risks.” When the market tightens, it may be difficult for oil companies to meet the challenge.

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This entry was posted in Data Analysis and Visualization, Money, business, investments, statistics, trends, Past, present, and future, Research and tagged , . Bookmark the permalink.

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