Decarbonization in the Oil and Gas Sector: What Investors Should Know

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Demand for oil and natural gas is not going away anytime soon. Goldman Sachs sees global oil demand, led by India and China, hitting a new all-time high in the third quarter of 2023, while the IEA recently predicted that global oil demand will increase by 2.4 million barrels per day this year.

Even with major increases in renewable energy generation, our system will still require oil and gas for transportation, electricity generation, petrochemicals, and heat for years to come.

Oil and gas companies are keenly aware of this reality, and many are choosing to take action to decarbonize the upstream, midstream, and downstream segments of the industry.

While such developments may be seen as old news, traders should remain aware of how oil companies are moving to improve energy efficiency and decrease their own demand for fossil fuels, as this can directly impact the amount of oil they can bring to the market.

Moreover, investors should similarly keep track of how oil and gas companies are investing in decarbonization projects and technology, as it has become clear that these decisions can influence a company’s share price.

For example, carbon capture and storage (CCS) has rapidly emerged as one of the most popular methods of decarbonization for the energy industry.

As such, CCS projects and innovations have attracted unprecedented investment and support from leading oil and gas companies. Just recently, Occidental Petroleum (NYSE:OXY) announced plans to invest $800 million to $1 billion in a carbon capture plant to remove carbon dioxide from the air.

Despite CCS’s current popularity, it is far from the only way that oil and gas companies are hoping to prevent their emissions from entering the