Energy transition = volatility
Oil and gas investment is simultaneously way too high and dangerously low
Two contrasting papers this week threw into sharp relief just how irreconcilable energy market stability and climate change mitigation can be. A brewing investment crisis threatens to spill over into a genuine energy supply crisis that could make the extreme market events of late 2021 look like a mere blip in hindsight. A huge hike in upstream oil and gas investment this decade would stave off the threat, but at untold environmental cost.
Oil and gas prices are notoriously spikey and prone to supercycles. The ongoing fallout from Covid-19 and a messy energy transition are intensifying price instability, both at a macro and micro level.
The International Energy Forum this week warned that “unprecedented uncertainty” around the energy transition is driving a trend of “pre-emptive underinvestment” in oil and gas supply that threatens to exacerbate wild price swings:
“Record price volatility and increasingly divergent long-term demand narratives are being amplified by a changing regulatory a…