Energy security has re-emerged as a politically strategic imperative. However, it also provides a valuable opportunity for upstream investments to catch supply up with demand. The near-term uncertainty of demand and the potential medium-to-long-term consequences add to investment hurdles and deterrents. Once economic activity recovers, it will likely be less oil demand-intensive than it would have been due to fuel switching, EV penetration, efficiency improvements, and accelerated climate policies. If the world enters a recession in 2023, depending on the duration and depth, it is possible that oil demand growth could remain below trend in the next couple of years, potentially extending the post-pandemic demand stall to five years. Near-term economic headwinds weigh heavily on markets and investors.The question is now, will companies re-invest, and if so, where? While companies prioritize returns to shareholders, share buybacks, and debt repayment, they still have ample free cash flow that could jump-start upstream investment. Oil and gas E&Ps are experiencing record profits. The major constraint on near-term investment levels has shifted from capital availability to capital allocation.A cumulative $4.9 trillion will be needed between 20 to meet market needs and prevent a supply shortfall, even if demand growth slows toward a plateau. This estimate for 2030 is 18% higher than we assessed a year ago primarily because of rising costs. Annual upstream investment will need to increase from $499 billion in 2022 to $640 billion in 2030 to ensure adequate supplies.The global rig count is up 22% from a year ago but remains 10% below 2019 levels. Higher costs primarily drive the increase in investment, but activity has also started to recover. Oil and gas upstream capital expenditures increased by 39% in 2022 to $499 billion, the highest level since 2014 and the largest year-on-year gain in history. Investment Needs Rise Amid Market Uncertainty A report by the International Energy Forum and S&P Global Commodity Insights
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