Displaying items by tag: energy

In an article for Bloomberg, Will Mathis covers how Shell and BP are retreating from its renewable energy projects in wind and solar due to lackluster returns and increased competition. It’s leading to opportunities for renewable firms who are no longer facing competition from Big Oil who are subsidizing projects with profits from oil and gas. 

As these oil & gas companies entered the renewable space, they were willing to bid at lower prices than renewable firms in order to win government contracts, notably in offshore wind. However, returns on these projects have been middling, in part, due to inflation and supply chain constraints for key components. 

Less than 4 years ago, Shell’s ambition was to be the world’s biggest producer of renewable energy. Now, it no longer has any sort of goal for renewable energy capacity and recently announced that it is upping capital expenditures on fossil fuels, likely due to continued, higher returns in the space. Similarly, BP is shifting away from solar and wind for similar reasons. Instead, it’s increasing spending on its biofuels and service stations while cutting back on renewables. 

Yet, cumulative, global investments in renewables continue to increase with an expected $1.7 trillion in 2023 according to the IEA which is the 8th straight year of growth. 

Finsum: Fossil fuel companies like BP and Shell are pulling back from renewable energy projects. However, global investment in renewables continues to increase, reaching an expected $1.7 trillion in 2023. 

Last week, the International Energy Agency declared that the world will reach peak oil demand by the end of the decade. It attributes this to an increasing share of energy produced by renewables, the explosion in EV adoption, and continued increases in efficiency. 

Due to these factors, it sees growth in oil demand growing marginally over the next few years before peaking in 2030. This year, the agency sees $2.8 trillion invested in the energy sector with $1.7 trillion going into non-fossil fuel sources like nuclear energy, renewables, and EVs. 

Out of this group, solar is the leader with nearly $700 billion in investments which is nearly equivalent to all of the capital spending on oil. In total, fossil fuel investments which include coal, oil, and natural gas are expected to total $1 trillion. 

In terms of EVs, the agency forecasts that 14 million will be sold this year. It also sees continued adoption with electric buses and trucks gaining market share. 

Overall, the IEA believes that investors and fossil fuel companies need to make appropriate adjustments to account for these shifts in behavior and consumption. 

Finsum: The IEA recently declared that oil demand will peak in 2030 due to increasing EV adoption, growth in renewables, and increasing efficiencies. 

The Land of Oz? Um, not exactly.

While clearing the Kansas legislature, a proposal aimed at standing in the way of investing that bears in mind environmental, social and governance factors, butted against headwinds; namely, divisions within its GOP minorities that have watered down the measure, according to timesunion.com. It represented a setback among some conservatives.

In the last two years, Oklahoma, Texas and West Virginia are among at least seven states that have enacted anti-ESG laws. Additionally, two GOP governors, Florida’s Ron DeSantis and Greg Gianforte of Montana moved to ensure the funds in their states weren’t invested with ESG principles in mind.

“We right here wanted to focus on what we control — state pensions, state investments, government contracts, stuff like that,” said Republican state Rep. Nick Hoheisel, of Wichita, chair of the House committee handling the legislation, reported usnews.com.

“It’s still a panicked response to a fake issue that’s been created by right-wing media,” said state Rep. Rui Xu, a Kansas City-area Democrat.

Those who are aligned with ESG principles maintain that, financially, it makes sense to keep in mind  issues like whether a shift to green energy adds more risk to investing in fossil fuel companies.

While offshore oil drilling has been growing slowly in recent years, research firm Rystad Energy expects a surge in new spending over the next two years. Energy companies had previously been hesitant to commit to expensive new projects that can take years to pay off. But with oil and gas demand rising after the pandemic, some companies are now looking for projects that can offer reliable production in the longer term. According to Rystad Energy, the offshore oil and gas industry has $214 billion of new project investments lined up in the next two years, the highest two-year total in a decade. In fact, it will mark the first time since 2012-2013 that companies have spent this much to develop offshore projects. According to Rystad, “Offshore activity is expected to account for 68% of all sanctioned conventional hydrocarbons in 2023 and 2024, up from 40% between 2015-2018.” Middle Eastern producers will account for most of the growth, however, there are projects off several continents. For example, U.K. offshore spending is expected to rise 30% this year to $7 billion, while spending on Norwegian projects could increase 22% to $21 billion, according to Rystad. Plus, North America, Brazil, and Guyana are all seeing growth as well.

Finsum:According to research firm Rystad Energy, a surge in new spending for offshore oil drilling is expected over the next two years as companies look for projects that can offer reliable production in the longer term with oil and gas demand rising.

While oil prices fluctuate constantly, there is a broad consensus that prices will rise throughout 2023. For instance, Forbes' Bill Sarubbi noted that the technical data of oil trading suggests prices are going to go higher. In a recent article, Sarubbi said that historical data shows oil prices tend to rise between March and May most of the time, therefore it makes sense to expect prices to rise this year as well. Data analytics firm Refinitiv singled out two factors that will drive prices on the supply and demand sides, Russia and China. Refinitiv expects Brent crude to rise above $100 per barrel by the end of the year and average $90 for the full year. The company said at a recent industry event that oil demand this year will surge by 2 million barrels daily and that China will account for half that. In addition, Russia's supply will tighten this month and maybe remain tight, which adds upward pressure to oil prices. Plus, Goldman Sachs senior energy economist Daan Struyven recently reiterated the bank's forecast for higher oil prices due to the lag between an oil market shock and the effect of the shock manifesting in futures prices.

Finsum:There is a broad consensus that oil prices will rise through the year due to technical data of oil trading suggesting prices are going to go higher, demand from China, tightened Russian supply, and the lag between an oil market shock and the effect of the shock manifesting in futures prices.