• Oil and gas upstream capital expenditures increased by 39% in 2022 to $499 billion, the highest level since 2014 and the largest year-on-year gain in history. Higher costs primarily drive the increase in investment, but activity has also started to recover. The global rig count is up 22% from a year ago but remains 10% below 2019 levels.

• Annual upstream investment will need to increase from $499 billion in 2022 to $640 billion in 2030 to ensure adequate supplies. This estimate for 2030 is 18% higher than we assessed a year ago primarily because of rising costs. A cumulative $4.9 trillion will be needed between 2023 and 2030 to meet market needs and prevent a supply shortfall, even if demand growth slows toward a plateau.

• The major constraint on near-term investment levels has shifted from capital availability to capital allocation. Oil and gas E&Ps are experiencing record profits. While companies prioritize returns to shareholders, share buybacks, and debt repayment, they still have ample free cash flow that could jump-start upstream investment. The question is now, will companies re-invest, and if so, where?