Global energy investment fall in 2020
Global energy investment is expected to plunge by around 20 per cent or $400 billion in 2020, its biggest fall on record, because of the new coronavirus outbreak, the International Energy Agency (IEA) said on 27 May 2020. The Paris-based IEA said this could have serious repercussions for energy security and the transition to clean energy as the global economy recovers from the pandemic. Governments are easing restrictions put in place to curb the spread of the virus after the confinement of around 3 billion people brought the global economy to a near standstill.
- At the start of the year, global energy investment was on track for a 2 per cent increase in 2020, its biggest growth in six years, the IEA said. A total of $1.8 trillion was invested in the sector in 2019.
- The historic plunge in global energy investment is deeply troubling for many reasons.
- It means lost jobs and economic opportunities today, as well as lost energy supply that we might well need tomorrow once the economy recovers, that it could hurt the move towards cleaner energies.
- The IEA said revenues for governments and industry are set to plummet by over $1 trillion in 2020 due to the fall in energy demand and lower prices.
- Global energy companies have cut investments and shelved projects to shore up their finances due to the crisis. The IEA said higher debts after the crisis will pose lasting risks to investments.
- Investment in oil and gas is expected to fall by almost one-third. The IEA said if investment in oil stays at 2020 levels, it would reduce the level of global supply in 2025 by almost 9 million barrels a day, a clear risk of tighter markets if demand moves back to pre-crisis levels.
- The IEA was born with the 1973-1974 oil crisis, when industrialised countries found they were not adequately equipped to deal with the oil embargo imposed by major producers that pushed prices to historically high levels.
- This first oil shock led to the creation of the IEA in November 1974 with a broad mandate on energy security and energy policy co-operation.
- This included setting up a collective action mechanism to respond effectively to potential disruptions in oil supply.
- The framework was anchored in the IEA treaty called the “Agreement on an International Energy Program,” with the newly created autonomous Agency hosted at the OECD in Paris.
- The IEA was established as the main international forum for energy co-operation on a variety of issues such as security of supply, long-term policy, information transparency, energy efficiency, sustainability, research and development, technology collaboration, and international energy relations.
- The IEA’s founding members were Austria, Belgium, Canada, Denmark, Germany, Ireland, Italy, Japan, Luxembourg, The Netherlands, Norway (under a special Agreement), Spain, Sweden, Switzerland, Turkey, United Kingdom, and the United States.
- They were followed by Greece (1976), New Zealand (1977), Australia (1979), Portugal (1981), Finland (1992), France (1992), Hungary (1997), Czech Republic (2001), Republic of Korea (2002), Slovak Republic (2007), Poland (2008), Estonia (2014), and Mexico (2018).