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The Covid-19 pandemic has led to the largest drop in global energy investment in history, with spending expected to plunge in every major sector this year, the International Energy Agency says in a new report.
“The unparalleled decline is staggering in both its scale and swiftness, with serious potential implications for energy security and clean energy transitions, ”says the report.
At the start of 2020, global energy investment was on track for growth of around two per cent, which would have been the largest annual rise in spending in six years.
But after the Covid-19 crisis brought the world economy to a standstill in a matter of months, global investment is now expected to plummet by 20 per cent, or almost $400 billion(42.8 trillion), compared with last year, according to the IEA.
“The historic plunge in global energy investment is deeply troubling for many reasons,” said Fatih Birol, the IEA’s Executive Director.
“It means lost jobs and economic opportunities today, as well as lost energy supply that we might well need tomorrow once the economy recovers.”
She added that the slowdown in spending on key clean energy technologies also risks undermining the much-needed transition to more resilient and sustainable energy systems.
A combination of falling demand, lower prices and a rise in cases of non-payment of bills mean that energy revenues going to governments and industry are set to fall by well over $1 trillion in 2020, according to the report.
Oil accounts for most of this decline as, for the first time, global consumer spending on oil is set to fall below the amount spent on electricity.
Global investment in oil and gas is also expected to fall by almost one-third in 2020.
The natural gas industry was already under pressure, and investor confidence and access to capital have dried up, investment in shale is anticipated to fall by 50 per cent in 2020.
At the same time, many national oil companies are now desperately short of funding.
For oil markets, if investment stays at 2020 levels this would reduce the previously expected level of supply in 2025 by almost 9 million barrels a day, creating a clear risk of tighter markets if demand starts to move back towards its pre-crisis trajectory.
