The disruptive force of the coronavirus pandemic has reduced demand for oil and gas worldwide, and is appreciably decreasing total energy investments, likely reducing the available options for a global economic recovery.
"At the International Energy Forum (IEF), we see this moment as a major investment crisis," said Secretary General Joseph McMonigle, who spoke at the ADIPEC 2020 virtual meeting in November. "Since COVID-19, we've seen company announcements regarding capex cuts, and we believe total energy investment will drop significantly."
The IEF forecasts that upstream production will fall about 35 percent and renewable investment by 10 percent due to the pandemic. As a result, the IEF expects it will create challenges to achieve energy security and sustainability goals, and more difficult to alleviate energy poverty.
"I think COVID is really widening the divide between those with energy access and the world's poorest without energy access," said McMonigle. "It's going to require a massive global response, and, frankly, in my opinion, deserves as much attention as the global community gives to climate change."
Some 1.3 billion people worldwide have no access to modern energy services, and more than 800 million people lack access to electricity today. About 2.8 billion people lack access to clean cooking fuels and technologies, mostly in Africa and Asia.
McMonigle said that this investment deficit can quickly turn into a supply deficit if let unaddressed. The oil and gas supply-demand balance will tighten faster when demand returns to pre-pandemic levels, he noted. From that point, market volatility, including higher price spikes, could end up reducing possibilities for economic recovery and sustainable growth globally.
Echoing the comments of HRH Prince Abdulaziz bin Salman Al-Saud, Minister of Energy for the Kingdom of Saudi Arabia, McMonigle said that the best hope for energy markets is the swift deployment of a COVID-19 vaccine. HRH Prince Abdulaziz said the promise of a vaccine to address the pandemic could reverse the signs of weak demand.
"We're also hopeful like everybody in the whole world that a solution to mitigate the virus in the form of a vaccine and the spread of vaccine availability would be the most meaningful type of mitigator to the situation," said HRH Prince Abdulaziz at the ADIPEC meeting. "We're hopeful that vaccines are found, and the vaccine is spread. Hopefully, mobility will be regained and a state of normalcy with the economy would transcend as a result of that."
McMonigle said the vaccine news from Moderna and Pfizer, though not an immediate end to the pandemic, may provide companies with more certainty about the future adding the outlook will be evolving on a month-to-month basis but in a direction with more confidence.
The IEF is also playing a critical role at the behest of the G20, which asked it to enhance its JODI (Joint Organisations Data Initiative) to focus on short-term market stability. The IEF has worked to sharpen its focus on the measures that governments should consider to effectively respond to an emergency of this scale. Improved dialogue on demand and supply recovery trajectories and JODI energy data transparency remain central to those efforts.