High oil product prices have motivated investors to pour capital into the oil and gas sector, while low-carbon resources have stagnated.
Against the background of the current geopolitical crisis and the high level of concerns about energy security, the high variation in the sector and the high prices of oil and gas noted the first half of 2022. This fact greatly encouraged energy investors who started to allocate large capital in the sectors of oil and gas, while there was no change in investments in sustainability proposals, such as the one aimed at the low carbon index in the market.
As Wood Mackenzie shows, investments in oil and gas still exceed investments to increase low-carbon use. As the allocation of capital in the low-carbon economy was a major stock market agenda between 2020 and 2021, political aid after the promises of net zero at COP26, in November 2021, only seemed to seal a change in the structure of zero carbon investments from the fossil fuel sectors, reports Wood Mackenzie.
Zero-carbon investments worsened due to Russia's war
As previously mentioned, investments in the zero carbon proposal were foreseen in the years 2020 and 2021, however, this initiative did not remain and worsened in view of the war in Ukraine and the change in the economy of the sector.
With Russia's attack on Ukraine, the points of view of supply, demand and the price of carbon are constantly changing, leading to a rewrite of energy trade flows. In addition, the energy sector, more specifically the oil and gas sector, had a strong performance in the stock market, with the rise in oil and gas prices. gas raising the price of various products, based on the study done by Wood Mackenzie, which analyzed whether this motive has changed investor perceptions of different zero-carbon strategies across the sector.
The energy intelligence company shows that investors have focused on companies that produce pure oil and gas, which are more leveraged by oil prices over the first five months of 2022, just as they are in any bull cycle.
Investors do not allocate capital in the zero carbon sector for fear of not getting a return
Investors show that they do not invest in the zero carbon proposal, as they are afraid that companies will spend more in the sector, given that a tight upstream supply chain has diluted the return on investment for relevant expenditures.
In addition, there is also a self-interest of companies, since, according to the energy intelligence provider, management has observed that the less it spends, the more efficient the performance of the company's shares will be.
Zero carbon investments
Wood Mackenzie also highlights when and how investor perceptions may change, claiming that it may take longer than expected after COP26, as Russia's invasion of Ukraine has reinforced the world's dependence on oil and gas and imposed doubts about whether the world is prepared to receive the proposal of carbon zero.
With the structural dislocation in the oil and gas sectors, the energy intelligence company expects high oil and gas prices in the coming years. The company also claims that this transforms the economic and attractive perspectives for the carbon sector.
