Private Equity’s Energy Interests Driven by Profit Realities

April 14, 2015 by wilsonneelynyc

profit pic The private equity industry has had a longtime interest in the energy sector. Since 2009, $157 billion in private equity has made its way to the energy industry, with $32 billion raised by only 33 funds in 2014 alone. While voices in politics and the scientific community have called for finding new sources of energy, including solar and wind power, the private equity sector has found itself in agreement with energy industry experts, many of whom agree that oil will remain an important part of the country’s energy equation for decades to come. BP’s internal estimates suggest that nearly 90% of the energy consumed in 2035 will be sourced from fossil fuels, and experts expect that meeting those energy demands will require about $40 trillion. More than half of that amount, $23 trillion, will be required to extract, refine, and transport the fuel products.

Some experts have suggested that industry estimates are too conservative and that private equity firms are discounting the degree to which renewable energy may come to dominate the landscape. Private equity has not solely focused on fossil fuels, investing $4 billion in alternative energy since October 2013. However, that amount is dwarfed by the investments in traditional oil and gas outfits, a development driven by the assumed reliability of the investments and an enormous boom in domestic natural gas extraction.

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