(Credit: Pixabay)Driven by the oil and gas industry but with an eye on a variety of investment opportunities from clean energy transitions, energy sector growth has recorded its highest market capitalization over the last year, according to StockApps.com.
Energy had a market capitalization growth of 30% from March 2021 to March 2022, far outpacing any other sector, according to the StockApps report. With energy demand constantly growing and the need to transition to cleaner energy sources and systems, the market will continue to increase, the report finds.
The analysis shows that energy sector growth relies greatly on lowering carbon emissions as energy use increases. That will help increase renewable energy installations over the next decade.
New policies to increase clean and efficient energy will also keep the market growing, especially with the need to meet new requirements. There are also financial and investment incentives involved in some new regulations to increase technology and manufacturing of energy transitions, such as the numerous outlined in the United States’ Inflation Reduction Act.
Concerns about grid reliability as communities grow and demand is pushed to limits through natural events or other impacts, such as heat, hurricanes, or wildfires, also help push the market growth.
According to the International Energy Agency, global energy investment in 2022 is expected to increase by 8% and grow to $2.4 trillion. Much of that investment is for renewable energy sources and grid improvement.
According to BloombergNEF, there was $755 billion in energy transition investments in 2021, a 21% increase from the year before. Almost half of those investments were in Asia.
Growing technology such as better data and smart city systems are seen by some as key to grid investments. Financial tools like ESG-based exchange-traded funds have also grown in popularity over recent years. Despite new financial efforts toward sustainability, some financial executives have questioned the reliability of some ESG investment information.
The Oil and gas industry dominates the sector because most companies are involved in some part of the energy supply chain, StockApps says. Most of the largest energy firms worldwide are also state-owned, such as China’s Sinopec and PetroChina, which also play a role in the market positioning of oil and gas.
Dependence on fossil fuels remains the primary force of the oil and gas industry’s positioning in the energy market. Fossil fuels are still used in many everyday uses and some emerging markets are slower to transition to cleaner sources.
A Moody’s report earlier this year found net-zero targets could lead to transition risks in emerging markets and more investment opportunities were needed. While a recent Wärtsilä study outlined how several Southeast Asian markets can achieve energy transitions.
"Under the energy sector, there are a lot of investments,” says Edith Reads, a StockApps specialist. “Renewable energy, grids, and energy efficiency are experiencing a rapid expansion of investment. However, the spread of renewable energy is not even. Only the developed economies and China are notable regions investing in it. Other developing economies are struggling with energy security and its high costs.”
Despite still dominating in fossil fuels, traditional oil and gas companies have invested in clean energy and low-carbon technologies. Carbon capture and green hydrogen development are among some of the efforts.
