S&P/ASX 200 Index (ASX: XJO) oil stocks aren't for everyone.
The big ASX oil and gas shares are off the list for most ESG investors, concerned over the carbon emissions of their products derailing the world's net zero by 2050 plans.
In fact, the International Energy Agency has recommended that no new oil and gas projects should be approved in order to meet that goal.
So, does that spell a near-term end for ASX 200 oil stocks Santos Ltd (ASX: STO) and Woodside Energy Group Ltd (ASX: WDS)?
Probably not.
What's the outlook for oil and gas investment?
The energy chaos unleashed in the wake of Russia's invasion of Ukraine demonstrated that the world is still heavily reliant on fossil fuels.
Yes, even leading 'green' nations like Germany and The Netherlands can't yet keep the lights and heat on with renewables alone. Not to mention their transportation networks.
Pointing to those disruptions, and in good news for ASX 200 oil stocks, Spencer Dale, chief economist at global oil giant BP plc (LON: BP) said the war "highlighted the need for the transition away from hydrocarbons to be orderly, such that the demand for hydrocarbons falls in line with available supplies, avoiding future periods of energy shortages and higher prices".
In BP's annual energy outlook (courtesy of The Australian Financial Review), the company estimates that new investments in oil and gas production are required for at least another 30 years. A lengthy investment horizon for our ASX 200 oil stocks.
Under the 'best case' climate policy scenario (which envisions a 95% emissions reduction by 2050) BP said fossil fuels would still supply some 20% of the world's primary energy by 2050. That compares to somewhat less than 80% today.
Should the world continue on its current emissions reduction path, BP forecasts fossil fuels will still provide 55% of the world's primary energy needs by 2050.
BP does expect demand for oil to peak over the coming decade as EV numbers grow. But that doesn't mean ASX 200 and global oil stocks can sit on their laurels.
"Natural declines in existing production sources mean there needs to be continuing upstream investment in oil and natural gas over the next 30 years," Dale said (quoted by the AFR).
Dale added:
Global energy policies and discussions in recent years have been focused on the importance of decarbonising the energy system and the transition to net zero. Events of the past year have served as a reminder to us all that this transition needs to take account of the security and affordability of energy.
How have these ASX 200 oil stocks been performing?
The Santos and Woodside share prices both charged higher in the first half of 2022 as oil and gas prices rocketed. Both ASX 200 oil stocks came under some pressure as crude prices retraced.
However, the Santos share price remains up 1% over the past 12 months while the Woodside share price has leapt 45%.
