Dec 11, 2020   SOURCE: BusinessWire

New IEF Report Warns Oil and Gas Investment Cuts Will Spur Higher Prices and Volatility

The International Energy Forum (IEF) today released a new joint report with Boston Consulting Group (BCG) that warns weak energy demand caused by the COVID-19 pandemic and subsequent investment cuts by companies will have repercussions through a future supply shock.

“Although upstream investment has peaked for now, ongoing demand for oil and gas will necessitate an increase soon. Without sufficient investment, a reduced supply of oil and gas could lead to higher prices and greater market volatility, slowing the global economic recovery and jeopardizing energy security, and international goals,” the report concludes.

The report “Oil and Gas Investment in the New Risk Environment” was presented in an online event Thursday by IEF Secretary General Joseph McMonigle and BCG Global Energy Practice Leader Alan Thomson. The webinar was livestreamed to the public.

The report states that capital expenditures by oil and gas companies has fallen by 34 percent this year and early assessments indicate further reductions of 20 to 30 percent in 2021.

IEF Secretary General Joseph McMonigle said the global community must continue the race to the energy transition but also needs to be cognizant of this potential new fallout caused by the pandemic. “Given that producing natural oil and gas wells decline over time, slashing investment in new production locks in lower total supply,” McMonigle said. “While that may not pose an immediate threat to oil and gas markets, it won’t be long before this lower supply collides with resurgent demand. The result will be higher and more volatile oil prices and headwinds for the post-pandemic global economic recovery.”

According to the report, the IEF and BCG analysis “suggests that industry investment will have to rise over the next three years by 25 percent yearly from 2020 levels to stave off a crisis” and “substantially greater sums will be needed by the end of the decade to ensure sufficient production to guarantee market stability.”

The full report and webinar replay is available on the IEF website (www.ief.org/investmentreport).

*Source: AETOSWire