PARIS, July 7 (UPI) — Investments in the energy sector, including investments in a low-carbon future, are down because of lower oil prices, the International Energy Agency said.
The price for Brent crude oil, the global benchmark, is down about 15 percent from this time last year and 54 percent lower than in 2014. That’s left energy companies short of the investments they need for exploration and production, known as the upstream side of the energy sector.
Data published from the International Energy Agency show investments declined in 2015 and so far this year, the first time in more than 30 years for a consecutive decline.
“The industry cut more than $300 billion in spending in two years, or 42 percent of the total, an unprecedented downturn, even taking into account significant reduction in costs,” the IEA said in its report. “North America accounted for about half the drop.”
Lower crude oil prices are in part behind a decline in U.S. crude oil production, where a build in output helped push markets toward the supply side and lowered oil prices. U.S. crude oil production is expected to decline 8.5 percent next year to 8.6 million barrels per day. Consumers, meanwhile, are benefiting from lower retail fuel prices, reviving demand. That demand increase helped pull oil back from below $30 per barrel in early 2016.
The IEA, which has headquarters in Paris, said that, despite the recovery in crude oil prices, a significant increase in investments is unlikely next year. On the consumer side, the report found a move in favor of larger trucks and sports utility vehicles.
“In the United States, SUV sales are now 2.5 times higher than light duty vehicles,” the report said. “In China, SUV sales are 4 times higher than light duty vehicle sales.”
In the United States, the transportation sector accounts for about a third of all greenhouse gas emissions.
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