Oil price increases ‘may spur investment in fossil fuel projects.’
Oil price increases ‘may spur investment in fossil fuel projects.’: With crude oil reaching $90 (£67.1) a barrel for the first time since 2014 on Wednesday, experts have warned that oil firms should rethink their investments in new fossil fuel projects or risk wasting billions.
According to a recent research by Carbon Tracker, even if current prices indicate that future drilling operations may be cost-effective, they will not last long.
“For oil what we are seeing is a growing demand and growing pricing as the world recovers from the Covid pandemic. What we have seen in our report is that if you invest in projects now for these short-term price signals you will end up wasting a lot of capital.” Said, Mike Coffin, Head of Oil and Gas at Carbon Tracker.
According to Mr. Coffin, companies may squander billions of dollars in investments if they make decisions solely on current oil prices.
He anticipated that the sector will suffer an abrupt change to rapidly dropping demand for oil over the next five years, driven by the clean technology revolution and government climate legislation, with huge financial ramifications for investors.
According to the Carbon Tracker analysis, if the oil price fell to an average of $40 (£29.8) after 2026, $500 billion (£373 billion) of investment may be squandered on projects that were no longer viable.
According to Mr. Coffin, one of the report’s authors, this will be the outcome of corporations continuing to invest in enterprises based on short-term price signals under a scenario in which oil peaks in 2026 before swiftly decreasing as a result of climate policy action.
Oil price increases ‘may spur investment in fossil fuel projects.’: