However, the EIA expects continuing growth in oil production to outpace decelerating growth in global oil consumption and contribute to declining oil prices by 2022. Based on these factors, the EIA expects oil prices to average $60/barrel in 2022, as compared to $72+ right now.
Shell and BP: Green Energy Push
The need to diversify revenue sources out from non-renewable energy by incorporating green energy production measures is not lost on either BP or Shell. However, the degree of preparedness is markedly different.
BP has proclaimed its intention to increase green investments by 1,000% before 2030 and divesting itself of £20 billion worth of oil assets by 2025. The company is selling off its stake in North Sea oil assets and is potentially preparing for a fire sale of its Iraqi oil facilities.
In terms of green energy investments, the company joined a multi-national consortium to develop a 2,591 square-km wind farm off the coast of Norway, with additional investments in wind farm sites in the UK, US, and Denmark in the works. Additionally, it has made over £1 billion worth of investments in solar farms in 12 U.S. states and in Portugal.
Meanwhile, Shell is building up an electric vehicle charging business around the globe and developing hydrogen fuelling stations in California in anticipation of strong trends in shifting customer preferences. Shell – through its subsidiary Linejump – is currently buying green energy from 675 wind farms, solar farms and other mostly renewable generators scattered across the U.K. and selling it to businesses while also building Europe’s largest battery – required to offset fluctuations in renewable energy production due to weather production – in the town of Minety, 90 miles west of London.
However, it bears noting that Shell is being relatively wary and less-invested in green energy when compared to BP, given that consumption of its main offering – oil – is forecasted to grow for the next few years.
Shell and BP versus Brent
Since both companies’ current mainstay is crude oil – the benchmark for which is referred to as “Brent” – an examination of Brent prices versus the companies’ share prices would be in order.
Over the years, the companies’ share prices have shown increasingly higher correlation with the price of Brent, suggesting improvements in market consolidation particularly from 2015 onwards.
