The Impact of the Financial and Economic Crisis on Global Energy Investment
Energy Investment Plunge
- Global Energy Investment: Investment in energy worldwide has significantly decreased, primarily due to the global financial crisis and the worst recession since World War II.
- Oil and Gas Sector: Global upstream oil and gas investment budgets for 2009 have been cut by approximately 21%, totaling about $100 billion.
- Power Sector: Global electricity consumption could drop by 3.5% in 2009, marking the first annual contraction since the end of World War II.
Sector-Specific Impacts
Oil and Gas Sector
- Capital Spending: Over 20 planned large-scale upstream oil and gas projects, valued at over $170 billion, were deferred or canceled between October 2008 and April 2009.
- Exploration: Upstream industry is expected to sharply reduce spending on exploration, with a particular focus on regions with high development costs and small players.
Power Sector
- Demand and Financing: Electricity demand in the OECD fell by 4.9% year-over-year in the first quarter of 2009.
- Renewables: Investment in renewable energy assets could drop by 38% in 2009, though government fiscal stimulus can partially offset this decline.
- Coal Sector: Investment in the coal sector could drop by 40% in 2009, from very high levels in 2007 and 2008, which were exceptionally profitable.
Implications for Energy Security, Climate Change, and Energy Poverty
- Energy Security: Cutbacks in energy infrastructure investment will affect capacity with a lag, potentially leading to increased spare or reserve production capacity in the near term.
- Climate Change: Slower economic growth may initially curb emissions growth, but weak fossil-energy prices and financing difficulties could lead to higher emissions in the medium and long term.
- Energy Poverty: Reduced access to electricity and other forms of modern energy services is a significant concern for poor households.
Overall, the financial and economic crisis has had a profound impact on global energy investment, with significant implications for energy security, climate change, and energy poverty.
