May 14, 2019

Oil industry’s Goldilocks problem

Reproduced from IEA's World Energy Investment 2019 report; Chart: Axios Visuals 

Companies are either investing too much or too little in oil and natural gas, depending on whether or not the world takes aggressive action to reduce greenhouse gas emissions, concludes a new International Energy Agency report.

Driving the news: Oil spending levels, which have dropped since 2014 when oil prices collapsed, would need to drop even more to be consistent with the goals outlined in the 2015 Paris Climate Agreement. But investment levels also “fall well short of what would be needed in a world of continued strong oil demand,” the report states.

Where it stands: The above chart shows how conventional oil and gas discoveries are at record lows, creating risk in the coming years of either not enough oil for current demand or too much oil in a carbon-constrained world.

  • The report says investment in exploration is set to rise to $60 billion this year, an increase of 18% compared to 2018, which “would be the first one since 2010.”
  • “Nonetheless, the share of exploration in total upstream investment remains almost half the level in 2010.”

Between the lines: IEA excluded from this chart unconventional resources, like the ones found in shale rock formations driving America’s oil and gas boom. That’s because shale resources aren’t “discovered” the same way conventional kinds are. And anyways, the latter remain the dominant channel for investment (about two-thirds).

What they’re saying: Government uncertainty on climate policy is leading oil and gas companies to focus on more profitable projects with shorter lead times — like shale resources — that expose them less to long-term uncertainty, according to IEA expert Michael Waldron: “Governments have not clearly committed nor have they clearly not committed to reaching the Paris Agreement targets.”

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Situational awareness

Photo: Drew Angerer/Getty Images

Catch up on today's biggest news:

  1. Scoop: New White House personnel chief tells Cabinet liaisons to target Never Trumpers
  2. Trump misrepresents 2020 Russia briefing as Democratic "misinformation"
  3. Bernie Sanders takes aim at Bloomberg: "Trump will chew him up and spit him out"
  4. Nearly half of Republicans support pardoning Roger Stone
  5. Scoop: Lyft acquires cartop advertising startup Halo Cars

Sanders takes aim at Bloomberg: "Trump will chew him up and spit him out"

Photo: Mario Tama/Getty Images

Bernie Sanders told CBS "60 Minutes" that he was surprised by Mike Bloomberg's lackluster performance at Wednesday's Democratic debate.

What he's saying: "If that's what happened in a Democratic debate, you know, I think it's quite likely that Trump will chew him up and spit him out."

Scoop: Lyft acquires cartop advertising startup Halo Cars

Photo: Drew Angerer/Getty Images

Lyft has acquired Halo Cars, a small startup that lets ride-hailing drivers earn money via ad displays mounted atop their cars. Lyft confirmed the deal but declined to share any details.

Why it matters: Ride-hailing companies are increasingly eyeing additional ways to generate revenue, and Lyft rival Uber has been quietly testing a partnership with New York-based Cargo that gives it a cut of the advertising revenue, as I previously reported.