Oil and gas prices are rebounding from their pandemic lows, but the road ahead for the industry remains challenging amid new competitive threats and demands from investors. Global spending on oil and gas production is poised to remain below pre-pandemic levels through at least 2025, according to consulting firm Wood Mackenzie, as companies face pressure to improve returns and reduce their greenhouse-gas emissions. Meanwhile, investment in renewables and other clean energy technologies is taking off, threatening to eat into the market for oil and gas long-term.
Though oil prices have notched gains since November, they’re expected to remain below levels that support attractive returns, particularly for an industry still recuperating from last year’s historic drop in fuel demand.
The slowdown comes as investors explore alternatives such as solar and wind power, which have seen costs drop dramatically in recent years, and emerging technologies such as battery storage and biofuels.
Energy investment outside of fossil fuels, including renewables and other clean-energy technologies, is set to attract 60% of the world’s energy investment in this decade, according to the International Energy Agency.
Non-fossil-fuel investments will climb to an annual average of $1.4 trillion, the IEA says, higher than the $935 billion it has projected for oil, natural gas and coal. In the 2030s, it says, those investments will make up roughly two-thirds of energy spending.