Emanuel Datt
Investment in energy has failed to keep pace with demand for more than a decade and the fallout won’t be a short-lived price spike, but a compounding structural deficit that is forcing investors to rethink their energy exposure today.
“This is a structural deficit, not a cyclical one,” says Emanuel Datt, CIO of Datt Capital. “Oil and gas fields are depleting assets by nature. Every producing field loses output year after year without continuous reinvestment and for more than a decade, the capital required just to hold global production steady has been falling short.
“Years of ESG driven divestment, political pressure and regulatory challenges have starved traditional producers of the capital needed to keep pace with demand, widening the gap between what’s required to sustain supply and what’s actually being spent. The crisis is not a lack of money to find new oil. It is a severe lack of investment to maintain existing production infrastructure.”
Global markets have long relied on spare capacity held by the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) and the strategic reserves of countries such as United States, Japan and South Korea to absorb shocks.
“That cushion has worn dangerously thin. Strategic reserves have been drawn down toward floor levels in several countries, while OPEC+ spare capacity has shrunk as member nations struggle to hit their own production targets. This undersupply in energy investment has amplified the risk of more shocks. There is less of a buffer to account for the large supply disruptions, and the closure of the Strait of Hormuz from March 2026 laid that dynamic bare.
“Governments across the developed world discouraged fossil fuel investment before renewables matured enough to fill the gap, leaving a global energy system with less redundancy, less spare capacity and less investment than current demand requires, let alone future growth. Electrification tied to artificial intelligence (AI) infrastructure and broader technology adoption is only adding to the strain.”
In Australia, domestic gas prices are effectively set by liquefied natural gas (LNG) netback pricing to Asia. “Our local electricity costs are likely to stay firm regardless of near-term moves in international prices, compounded by government reluctance to approve new oil and gas developments at precisely the wrong moment,” says Datt.
He also highlights the widening gap between paper markets and physical supply conditions. Futures and algorithmic trading react instantly to headlines, from Washington, from OPEC, from the Middle East, producing volatility that often has little to do with actual supply and demand.
“For investors with a long time horizon and the stomach for short-term swings, that disconnect is an opening. When paper-market selling pushes prices below what physical fundamentals justify, patient capital can buy in at a discount to intrinsic value. Investors can panic and sell based on short-term headlines, whereas seasoned contrarians who are prepared to bear the volatility are able to purchase assets that will structurally benefit in the near term,” notes Datt.
Oil prices spiked sharply through March and April 2026 before pulling back just as sharply, even as the physical supply picture barely moved. Meanwhile the Japan Korea Marker (JKM), the LNG benchmark for East Asia, is tipped to rise materially as the northern hemisphere restocking season approaches, with gas storage across Europe and Asia still running well below seasonal averages.
Australia’s geology, energy infrastructure and engineering capability give it a competitive position that only strengthens as global supply constraints tighten.
Datt draws a parallel with the 1970s, an era of energy shocks, geopolitical discord and stagflation, when energy was one of only two sectors to deliver real returns above inflation. The mechanism, he says, is the same today: physical scarcity, sovereign debt pressure and currency debasement are pushing capital toward tangible, real-world assets.
Datt says, “We view energy as the ultimate safe haven. Capital historically rushes into tangible, irreplaceable real-world assets when fiat systems face structural crises. Nothing runs the physical world like energy.”
Rather than chasing speculative explorers, Datt Capital’s approach favours established producers with strong balance sheets capable of sustaining dividends through volatility.
“We are seeing opportunities in midstream energy, with current positions in New Hope Corporation, Yancoal and Whitehaven Coal. We believe seaborne thermal coal prices will climb materially in the second half of FY2027 as LNG shortages, driven by Qatar’s reduced market access, push European and Asian buyers to compete for scarce supply, with thermal coal stepping in as the substitution fuel of choice.
“We are also looking at upstream oil and gas, where the focus is on companies with high operating leverage, disciplined capital allocation and a track record of returning cash via dividends and buybacks. Over the past decade, Australia’s five largest energy producers have shown that rising energy prices flow almost directly to the bottom line, given the fixed-cost nature of established production infrastructure.
“Ancillary services and equipment providers, by contrast, are seen as less compelling given the commoditised nature of that work and its lower scarcity value relative to upstream and midstream assets.”