According to energy experts, 2021 will be a relief for oil. As more people get vaccinated, the demand for fuels will tick back up, which should raise the price and provide relief to the companies. Energy consultants such as Wood Mackenzie have predicted that global oil demand will increase by 6.6 million barrels per day year by 2021. Oil demand in China has strengthened in the last quarter of 2020 to higher levels than in the same period in 2019. The change in China’s oil demand points to the first sign of what will soon be a reality: rapid year-on-year growth in global demand in 2021.
In advanced economies, the expansion of renewable energy and nuclear power is expected to further reduce the remaining space for fossil fuel generation. Natural gas is likely to be more affected than coal as a result of an anticipated increase in natural gas prices.
In emerging and developing economies, demand growth is projected to outpace increases in renewables and nuclear energy, leaving some room for coal and gas production to expand. The Middle East has favorable conditions for cheap solar energy: low cost of capital, guaranteed purchase, fairness of suppliers and abundant sunshine. Cheap crude used to discourage investment in renewable energy in countries that rely on oil sales for revenue. Today, solar projects cost only a tenth of what they did a decade ago, thanks to more affordable equipment and better technology; Saudi Arabia, which currently has about 500 megawatts of capacity in renewables, is aiming for a 120-fold increase to 60 gigawatts by 2030, with most of it in solar power.
When Joe Biden officially becomes president, the largest economies in the world will all have governments that have set zero net greenhouse gas emissions targets 30 or 40 years from now. The U.S. will return to the Paris climate agreement, so low-carbon energy supply chains will be strategically more significant than ever. Climate change and renewable energy garnered a ton of attention this year; with the climate-friendly Biden administration, they’ll have even more, leading to a clean energy surge in 2021.
On the other hand, venture capital is investing in climate technology, a trending industry that includes tools to curb carbon emissions. According to PitchBook, the total cleantech venture funding in 2021 will be $ 15.7 billion.
This article is in our Market Outlook 2021
Andrés Damián Cerda, BSc in Economics
Ivana Arlen Juarez Aguilar, BSc in Economics