Virus sparks record drop in energy investment: IEA

Paris

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

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

Shale oil producers that catapulted the United States to the world's top crude nation stand to suffer the worst decline, the IEA said.

The agency's director Fatih Birol said in an interview: "All the energy sectors - oil, gas, renewables - everything is affected but the biggest impact is on shale oil. Total oil investments, we expect to decline by a third this year, but the shale industry will see a decline of about 50 per cent."

However, spending in renewable power projects is expected to fall by only around 10 per cent for the year, the report said.

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

But the report noted that "these investment levels remain far short of what would be required to put the world on a more sustainable pathway", and estimated 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.

"There is a risk that today's cutbacks lead to future market imbalances, prompting new energy price cycles or volatility," it said. If oil investment stays at 2020 levels, then supply in 2025 would be nine million barrels per day less than had been expected, the IEA estimated. AFP