Part 2: Who is Left to Make Investments in Fossil Fuels & Clean Energy?

May 22, 2023 | Macro Insights, No Bull Economics

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There is not a lot of incentive for profit-seeking companies to invest in demonized fossil fuels or in clean energy projects lacking ROI. This points to substantially higher energy prices and supply shortages that will have a profound economic impact.

Commentary

  • In the UN’s IPCC Lower 2°C scenario (plan to reduce global temperatures), average global oil demand is projected to decline from approximately 90MM barrels per day in 2021 to 65MM in 2050. The International Energy Agency’s Net Zero Emission scenario projects the need for 24MM barrels per day in 2050.
  • In any case, Exxon points out that without future investment, world oil production would be expected to drop to about 11MM barrels per day due to natural field decline.
  • An additional investment of $11 trillion through 2050 will be required in oil & natural gas to meet the world’s energy demand even in the International Energy Agency’s Net Zero Emission by 2050 scenario, according to Exxon.
Oil Supply Graphs
  • Notably, the $11 trillion investment in fossil fuel production does not consider the staggering amount of incremental clean energy investments to achieve the Lower 2°C scenario.
Solar & wind powerSolar capacity installed each year would have to increase by 4-5x the rate of the past five years. Wind turbines would have to be built at 2-4x the recent rate.
Carbon capture & storageThere are currently about 40MM metric tons per year of carbon capture and storage facilities in operation around the world. Over the next decade, 1.5x – 3x the existing carbon capture and storage capacity would have to be added every year.
NuclearCapacity would have to be added at around 3x the recent rate.
BiofuelsGrowth would need to continue for an entire decade and require commensurate growth in logistics. Whereas the IPCC Lower 2°C would require a growth slightly less than the average of the past five years, the IEA NZE would require 3.5x that growth in the next decade.
HydrogenGrowth would have to exceed 9% per year in the IEA NZE scenario, more than doubling current use in one decade.

Source: 2023-advancing-climate-solutions-progress-report.pdf (exxonmobil.com)

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