Forecasting is a dangerous game and one of the easiest ways to invite ridicule. The following comments, therefore, are not forecasts but simply form an indicative list of the key issues that those involved in any way in the energy business should be watching in 2019. The outcomes in each case will shape the market and the fortunes of the companies involved. First and most immediate is the impact of US sanctions on Iran.

A year ago, Iran was exporting some 2.1m barrels of oil a day. By November 2018, that had fallen to 1.1m b/d. If the sanctions are applied strictly, exports could fall close to zero — the stated intention of the US, designed to bring Iran to the negotiating table over its nuclear plans. If Iran compromises or finds a way around the sanctions, exports will increase again and prices are likely to fall. If the US enforces the sanctions in full, the fall in exports will stretch the current capacity of other producers to the limit, and prices are likely to rise. A variation of $20 or more either way from current prices is perfectly possible. No other single issue has such a potential impact or carries such uncertainty.  The second variable has longer-term consequences.

Will the energy business make the investment decisions necessary to fund the supplies and infrastructure the world will need over the next decade and beyond? According to the International Energy Agency, some $2.2tn of investment is needed each year up to 2025, rising to $2.8tn a year beyond that. The private oil companies such as BP and Exxon Mobil, have achieved remarkable reductions in costs, restoring profitability and the potential for dividend increases even at today’s prices. But are they and the investors in large-scale natural gas facilities or the upgrading and extension of power systems ready to invest in the new capacity that is necessary to replace the old? The private sector has the capability but may not have access to the resources that lie in politically difficult places such as Venezuela, Russia, and Iran. Some might also lack the will to invest in areas of high political risk. At the same time, many state-owned national companies are being starved of funds by governments that have not made the fiscal adjustment to low prices. At least some of the state companies may not be capable of investing enough to maintain output or to put in place essential infrastructure such as smart grids capable of managing distributed power supplies and maximizing the efficiency of energy use. The third issue concerns renewables. Costs have fallen and by common consent, there is to be a transition to a lower carbon economy. But who will invest to make that transition possible?