Government policies to fight climate change are discouraging oil companies from investing heavily in new production even as they turn in record profits – a dynamic that could spell tight supply and high prices as clean energy alternatives seek to fill the void.
“If we don’t maintain some level of investment in the industry, you end up running short of supply which leads to high prices,” Exxon Mobil CEO Darren Woods said. He said oil and gas reserves are depleting at 5-7 per cent annually, and output will decline if companies stop investing to replace them. “If you want to add 100,000 barrels a day of production, you’re going to spend billions and billions of dollars,” Pourbaix said in an interview. “In terms of any real meaningful investment in large projects, that’s probably going to have to wait for some more clarity on the government front.”
Deloitte recently reported that investors holding $2.3-trillion of equity in the global oil and gas industry are changing expectations about growth markets for energy faster than company executives. “We’re going to get to a certain point this decade where the adoption of renewable energy, electric vehicles and heat pumps is going to start persistently eating away at demand,” he said.