Will the sharp move to renewable energies lead to higher oil prices?

Will the sharp move to renewable energies lead to higher oil prices?

The short answer to the above question is yes, but not just because of underinvestment due to the increased focus on renewables. That’s to say, it’s not just about a convulsive move to shake off fossil fuels in favour of the ESG narrative.

Politically, that’s definitely been the case. The tide has long turned on this issue and politicians are eager to at least appear to be saying the right things. However, the oil story is much more complex. Oil exploration has been suffering from chronic underinvestment for years. In the United States, investment in new wells peaked in 2014, and that wasn’t down to the green issue. You only have to look at who presided as commander-in-chief between 2017 and 2021 to confirm that.

Capital expenditures (CapEx) across the energy sector have been slashed due to financial pressures on these companies to run their businesses in a manner that helps them perform better as financial assets. For this situation, you can read a focus on paying dividends to investors, buying back shares to boost the share price, and paying down debt that would otherwise have been used to fund further exploration. You can also add to this the prioritising of low