Energy investment to take big hit from pandemic, IEA forecasts

Revenue from energy is forecast to fall by $1 trillion this year. (File/Shutterstock)
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Updated 27 May 2020

Energy investment to take big hit from pandemic, IEA forecasts

  • The fall in new spending on all energy sources is caused by the biggest ever fall in demand for energy
  • Global investment in oil and gas - forecast to fall by more than 30 percent - is the biggest element of the drop in energy investment

DUBAI: Global investment in energy is set to drop by 20 percent, or by nearly $400 billion, this year as demand plummets in the wake of the coronavirus pandemic, the International Energy Agency (IEA) forecast.

What the IEA called “an historic plunge” in new spending on all energy sources - from fossil fuels like oil and gas through to renewables like solar and wind - is caused by the biggest ever fall in demand for energy as economies try to edge out of the global economic lockdown brought about by the pandemic.

Revenue from energy is forecast to fall by $1 trillion this year, with earnings from sales of crude oil - essential for Saudi Arabian and other producers - accounting for most of that decline, the IEA said. For the first time in history, consumers will spend more annually on electricity than on oil.

Fatih Birol, the IAE’s executive director, said the forecasts were “deeply troubling” after the turmoil in energy markets since early March.

“It means lost jobs and economic opportunities today, as well as lost energy supply that we might well need tomorrow once the economy recovers. The slowdown in spending on key clean energy technologies also risks undermining the much-needed transition to more resilient and sustainable energy systems,” he added.

Global investment in oil and gas - forecast to fall by more than 30 percent - is the biggest element of the drop in energy investment, and will be felt by all producers.

“The shale industry was already under pressure, and investor confidence and access to capital has now dried up: investment in shale is anticipated to fall by 50 percent in 2020. At the same time, many national oil companies are now desperately short of funding,” IEA said.

The world’s largest oil company, Saudi Aramco, has said it would maintain investment plans at between $25bn and $30bn this year, but that spending plans for 2021 are under review.

Most of the big independent oil companies have already announced plans to cut back near term investment.

“For oil markets, if investment stays at 2020 levels then this would reduce the previously-expected level of supply in 2025 by almost 9 million barrels a day, creating a clear risk of tighter markets if demand starts to move back towards its pre-crisis trajectory,” the agency added.

Investment in renewables like solar panels has been more resilient than traditional energy sources during the crisis, but is expected to lose the gains it has made in the past three years as investment decisions are scaled back.

Overall investment in cleaner energy sources will comprise 40 percent of the global total this year as the proportion spent on oil, gas and coal falls significantly. “In absolute terms, it remains far below the levels that would be required to accelerate energy transitions,” the IEA said.

The so-called “silver lining” of the pandemic crisis - less-polluted environment as motor and industrial emissions decline dramatically - is downplayed by the IEA.

““The crisis has brought lower emissions but for all the wrong reasons. If we are to achieve a lasting reduction in global emissions, then we will need to see a rapid increase in clean energy investment. The response of policy makers – and the extent to which energy and sustainability concerns are integrated into their recovery strategies – will be critical,” Birol said.

Nor is there any sign of a greater uptake of more energy-efficient electric vehicles because of the crisis. “Estimated investment in efficiency and end-use applications is set to fall by an estimated 10 to 15 percent as vehicle sales and construction activity weaken and spending on more efficient appliances and equipment is dialed back,” the IEA said.


UK retail sales shoot past pre-virus levels as shoppers migrate online

Supermarkets such as Sainsbury’s have avoided many of the problems plaguing the rest of the retail sector amid the coronavirus pandemic. (Reuters)
Updated 19 September 2020

UK retail sales shoot past pre-virus levels as shoppers migrate online

  • Britain suffered the biggest economic hit of any G7 economy between April and June, when output fell by more than 20 percent

LONDON: British shoppers continued to increase spending last month, taking sales further above pre-COVID levels, as strong online demand helped much of the sector enjoyed a faster rebound than the rest of the economy.
Retail sales volumes rose by 0.8 percent in August, the Office for National Statistics said — slightly above the average 0.7 percent forecast in a Reuters poll — and, compared with a year earlier, they were up 2.8 percent, just below forecasts of 3 percent annual growth.
British retail sales had already overtaken pre-COVID levels in July and now stand 4 percent higher than before the crisis.
However, the rebound masks a sharp split between online and high-street retailers, with online and mail order retailing up 34.4 percent on the year in August, while many traditional retailers outside the grocery sector have suffered reduced footfall.
“Clothing stores continued to struggle, with sales still well below their February level. Overall, the switch to greater online sales means the high street remains under pressure,” ONS deputy national statistician Jonathan Athow said.
The crisis in traditional retailing is having a knock-on effect for commercial landlords, with many stores closing and tenants such as clothing chain New Look seeking to renegotiate rents to link them to turnover.

FASTFACT

British retail sales now stand 4 percent higher than before the crisis.

Clothing sales rose by 13.5 percent on the month, but are still 15.5 percent down on the year.
Grocery sales rose just 0.4 percent in August, after strong growth in previous months when British people had eaten at home more.
August saw a temporary government promotion for dining in restaurants, named “Eat Out to Help Out,” which earlier industry data suggested had dented grocery demand.
The Bank of England (BoE) said on Thursday that Britain’s economy was on course to recover faster than it had forecast in August, but, even so, output in the July-September period is expected to be 7 percent lower than in the final quarter of last year.
Britain suffered the biggest economic hit of any G7 economy between April and June, when output fell by more than 20 percent.
The BoE identified consumer demand as one of the brighter spots, but said it was vulnerable to an upsurge in COVID-19 cases as well as an increase in unemployment when the government’s temporary job support program ends next month.