The World Needs Trillions in Oil and Gas Investment to Avoid a Supply Crunch
Are We Falling Short?
Key Points
Research suggests that the world needs significant oil and gas investment, potentially in the trillions by 2030, to meet natural decline curves; however, current spending may fall short.
It appears likely that global capital expenditure (capex) for 2025 will be around $570 billion, which is below the estimated $640 billion needed annually by 2030.
The evidence suggests that top-producing countries, such as the US, Saudi Arabia, and Russia, as well as companies like Saudi Aramco and ExxonMobil, are driving production. However, investment gaps could impact supply.
There is controversy surrounding whether oil and gas will remain a viable long-term investment, given energy transition trends; however, steady demand and underinvestment may support higher prices.
Investment Needs and Current Spending
The world faces a critical need for substantial investment in oil and gas to offset the natural decline of existing fields, which can deplete at 5-10% annually. Reports, such as one from the International Energy Forum (IEF) and S&P Global Commodity Insights, suggest a cumulative $4.3 trillion is required between 2025 and 2030, translating to about $640 billion annually by 2030 to maintain supply. OPEC estimates even higher, at $17.4 trillion by 2030, to avoid a 23 million bpd deficit, with demand projected to rise to 110 million bpd by then.
However, current global upstream capex for 2025 is estimated at $570 billion, down from $600 billion in 2024, indicating a potential shortfall that could lead to supply constraints.
Top Producers and Investment Analysis
The top oil-producing countries in 2023, based on recent data, are the United States (19.4 million barrels per day), Saudi Arabia (12.1 million barrels per day), Russia (10.9 million barrels per day), Canada (5.9 million barrels per day), and China (4.2 million barrels per day).
Leading companies in 2025, by production, include Saudi Aramco (9.2 million bpd, targeting 12 million), ExxonMobil (7.7 Bcf/d natural gas, aiming for 5.4 million BOE/d by 2030), and Chevron (expecting 6-8% growth).
Despite these efforts, the decline in 2025 capex suggests insufficient drilling investment, potentially exacerbating supply issues, especially with factors like capital discipline and geopolitical risks at play.
ExxonMobil
Chevron
Investment Opportunity
Given the underinvestment, oil and gas may present a long-term investment opportunity. Steady demand, particularly from emerging economies, and potential supply constraints could drive higher prices, benefiting companies with strong balance sheets. While energy transition poses risks, the evidence suggests robust cash flows and valuation opportunities, making it a compelling case for investors, though volatility and policy shifts remain concerns.
Survey Note: Detailed Analysis of Oil and Gas Investment Needs and Market Trends
This survey note provides a comprehensive examination of the global oil and gas sector's investment landscape, focusing on the need for trillions in capital to meet natural decline curves, current capex budgets, top-producing countries and companies, and the implications for long-term investment opportunities.
The analysis is grounded in recent data and projections, reflecting the state of the industry as of July 8, 2025. It aims to inform stakeholders on the adequacy of current investments and future market dynamics.
Josh Young is one of the experts that I listen to on markets. He has an outstanding point on his X account today. “Gold soared, now copper is rising rapidly. Is oil next? One thing I like about Josh is has an excellent track record of being right. I highly recomend following him on his X account.
Background and Investment Needs
The oil and gas industry faces a significant challenge due to the natural decline of existing fields, with decline rates typically ranging from 5-10% annually for conventional fields and higher for unconventional shale plays. This necessitates continuous investment in exploration, drilling, and development to maintain production levels and meet growing demand.
The International Energy Forum (IEF) and S&P Global Commodity Insights, in a report from June 2024, estimated that a cumulative $4.3 trillion in upstream capital expenditure (capex) is required between 2025 and 2030 to prevent a supply shortfall, even as demand growth slows. This translates to an annual investment target of approximately $640 billion by 2030, up from $499 billion in 2022 and an estimated $600 billion in 2024. OPEC's estimates are even more stark, projecting a need for $17.4 trillion by 2030 to avoid a 23 million barrels per day (bpd) market deficit, with global oil demand expected to rise from 103 million bpd in 2023 to nearly 110 million bpd by 2030, driven by emerging economies and petrochemicals.
Current Global Capex Trends
Global upstream capex has shown recovery since the 2020 COVID-19 slump, reaching $499 billion in 2022 and estimated at $600 billion in 2024, a 39% increase from 2020 lows. However, recent projections for 2025, based on the International Energy Agency's (IEA) World Energy Investment 2025 report released on June 4, 2025, indicate a decline to $570 billion, a drop of about 5-6% from 2024 levels. This decline is attributed to reduced spending in North America, Russia, and Europe, driven by bearish oil price outlooks, economic uncertainties, and a focus on shareholder returns over production growth. The IEA report highlights that this figure includes both oil and gas, with about 40% going toward slowing production declines at existing fields, underscoring the challenge of maintaining supply amidst tightening investment.
Top-Producing Countries and Their Capex Contributions
The top oil-producing countries, based on 2023 production data from sources like the U.S. Energy Information Administration (EIA) and Statista, include:
Other notable producers include Iraq, Iran, the United Arab Emirates, Brazil, and Kuwait.
The U.S. leads with significant production from the Permian Basin, while Saudi Arabia, as OPEC's largest producer, holds 15% of global proved reserves and plans capacity increases. Russia's production remains resilient despite sanctions, and Canada's oil sands make a substantial contribution.
China's focus is on domestic production, with CNOOC raising capex to RMB 100-110 billion (approximately $14-15 billion) in 2023, targeting 730-740 million barrels of oil equivalent (boe) by 2025. Latin America, led by Brazil and Guyana, is expected to see capex growth, with Petrobras planning $102 billion from 2024 to 2028, primarily in pre-salt fields.
Top-Producing Companies and Their Investment Plans
The top oil and gas companies by production in 2025, based on market capitalization and production data from Straits Research (March 2025), include:
Investing in gas projects in Egypt and Mauritania as part of 2030 strategy
These companies dominate upstream capex, with national oil companies (NOCs) like Saudi Aramco and PetroChina, and supermajors like ExxonMobil and Chevron, leading investments. For instance, Saudi Aramco's capex was $37.6 billion in 2022, expected to rise to $45-55 billion in 2023, while ExxonMobil's 2023 capex was $26.3 billion, with plans for $23-25 billion in 2024. Chevron announced a 2025 capex budget of $14.5-15.5 billion for consolidated subsidiaries, a reduction from 2024, focusing on high-return basins.
Is Oil & Gas Right for Your Portfolio?
Assessment of Capital Adequacy
The evidence leans toward a significant shortfall in capital investment for drilling. The projected $570 billion for 2025 is below the $640 billion annual target for 2030, and given the 5-6% decline from 2024, the gap is widening. Factors contributing to this include capital discipline, with publicly traded companies prioritizing dividends and buybacks, declining U.S. shale productivity, geopolitical risks like sanctions on Russia, and cost inflation, which has risen 15-20% in recent years, eroding the capex impact.
OPEC's warning of a 23 million barrels per day (bpd) deficit by 2030, if unmet, could lead to higher prices and volatility, as noted by the IEA, which warns that insufficient capital expenditure (capex) could make high prices the "new standard."Implications for Long-Term Investment.
We have seen the inability of OPEC+ to increase production, even when quotas are increased, as evidenced by their failure to expand drilling programs.
Given the underinvestment, oil and gas may present a compelling long-term investment opportunity. Steady demand, projected to reach 110 million bpd by 2030, and supply constraints resulting from underinvestment suggest higher prices, benefiting companies with strong cash flows and low-cost assets. Over the past four years, the industry's net income rose by 16%, and capex by 53%, with robust performance in oilfield services.
With the shift in European oil companies back to the basics of oil and gas, it is yet another reminder that green energy comes with deindustrialization and fiscal failure.
The key difference between U.S. oil production and the rest of the world is the ownership of mineral rights. And over 50% of the oil is drilled through privately held firms that offer investors tax-preferred investments. These are highly sought after, especially for those living in California or New York, as these states have high tax rates.
Valuation opportunities exist, with some stocks trading near historical lows, despite risks from energy transition, geopolitical tensions, and policy shifts. The IEA notes that even in net-zero scenarios, some oil and gas investment is essential for energy security, supporting the case for investors to capitalize on this gap before market adjustments.
This analysis, drawing on recent reports from IEF, IEA, OPEC, and company data, underscores the urgency of addressing the investment shortfall to ensure energy supply stability, while highlighting the potential for oil and gas as a strategic investment amidst transition challenges. You can see why I am a Perma-Oil Bull. It just depends on timing.
We truly appreciate all of our great readers and listeners of the Energy News Beat Podcast. We have lots of great interviews lined up with CEOs and experts.
IEF Report, IEA World Energy Investment 2025, Straits Research, Statista.
Right on. We’re going to need to maintain/increase oil and gas investment because demand will continue to increase (economic growth and AI), there isn’t and won’t be a transition any time on the horizon, and nuclear is going to take plenty of time to build out.