The S & P 500 (Standard and Poor’s Index), is one of the most important ones of the United States Stock Market. It is used by analysts as a measure of the real situation of the markets. This article aims to discuss what has been going on with this index, especially in the energy stocks.
According to the World Energy Investment 2019 by the International Energy Agency, there has been a shift of investments between the actual trends. This presents an issue to accomplishing the Paris Agreement Targets and the Sustainable Development Objectives.
Analyzing the chart below (Evolution of markets share in the S&P 500), it is clear that the investments in the energy sector are not as important as they used to be. The energy business has been suffering a decline in investments (Figure-1), being now one of the smallest sectors in the stock markets.
The global energy investments in 2018 was of 1.8 Billion dollars. For the fifth time in a row, the technology companies and electric markets are attracting more investments than the oil and gas industry. The energy companies are facing an unprecedented uncertainty, with dramatic changes in markets, policies, and technologies. Traders and operators are not investing enough in the sector, struggling to maintain the actual demand, and neither in alternative energy technologies, allowing to reach Net Zero targets. This scenery presents a double risk for the energy sector.
The world is shifting towards short term, high risk investments. As a result, investors are turning over to technology companies, software development and even precious metals. The positive side is that some technology companies are now beginning to diversify their assets and opening energy departments or developing clean energy technologies, compensating the lack of investment in the sector.
In conclusion, more investment is needed in order to develop a more resilient energy mix and achieving the sustainable development targets. Also, the Research and development investment is far away from what is actually needed for disruptive technologies to become competitive. It will be important for energy companies to have this in mind and think of new business models, based in cluster approaches that would reduce investment, generate an immediate demand, and build decentralized resilient clean energy hubs.