Oil: A Worthy Investment?
As political pressure continues to mount against the extensive use of fossil fuels, one must wonder if petroleum oil - the most prized fossil fuel - is a reliable investment in an increasingly renewable European energy market. The European Investment Bank (EIB) has announced that it will cease financing oil, gas and coal projects by 2021 to appease the EU’s aim to be carbon-neutral by 2050. This new policy requires energy companies seeking EIB funding to prove that they can produce one kilowatt of energy while emitting less than 250 grammes of carbon dioxide. Werner Hoyer, the Bank’s president, describes the policy as ‘the most ambitious climate investment strategy of any public financial institution anywhere’. This ‘quantum leap’ in climate policy, as the EIB has called it, does narrow the scope of investment for oil-based projects in Europe.
The Organisation of Petroleum Exporting Companies (OPEC), a multinational organisation of the world’s largest oil producers, face an increasingly uncertain energy market. Stanford C. Bernstein, a London research firm, estimates that global demand for oil has risen by only 0.8% in 2019. This is the slowest pace at which the demand for oil has risen after the 2008 financial crisis. Although OPEC plan to counteract this stagnation by extending the December 2018 initiative to raise oil prices by curbing the production of 1.2m barrels a day into March 2020, European nations are capitalising on the financial benefits of clean energy. Germany, an economic powerhouse, has continued to expand its landmark ‘Energiewende’ (Energy Transition) policy. By attracting foreign competition such as Tesla, which plans on opening its first European production plant near Berlin, Germany is sure to increase competition against the oil-reliant automotive industry. Bird & Bird partner Matthias Lang does, however, note that the Energiewende policy alone cannot yet meet domestic energy needs.
Brighton Dube