Many experts predict that the devastating effects of Covid-19 on Big Oil will last long after the pandemic ends.
The year 2020 was when the world stopped — and along with it, the industries that supported our previously unceasing motions stopped too as a result of largescale lockdowns and a prolonged halt to international travel.
So while online businesses soared, the power of the energy industry diminished. In fact, the International Energy Agency (IEA) noted that the global demand for oil took a 30% nosedive as lockdowns began.
Yet many experts predict that this devastating effect will last long after the pandemic ends.
In September 2020, the Organization of Petroleum Exporting Countries (OPEC) released a grim forecast: The demand for oil won’t recover before 2021 ends. And other factors, such as the effects of last year’s OPEC-Russia price war, will likely hinder the industry’s recovery even after the pandemic has gone.
Even if oil and gas prices return to normal, that won’t magically bring the industry back from its current low. That’s because it’ll cost a significant amount of money to get things moving again, which, among other things, involves hiring and re-training a sufficient amount of manpower.
Consequently, even major oil-exporting countries are vulnerable to borrowing unsustainably just to finance this move, increasing the risk for potential bankruptcy. Yet the industry seems to be weathering the storm.
Just last February, crude made a huge comeback at $60 a barrel in London. And the IEA disclosed in June that it expects investments on energy to recover within the year.
On the whole, the industry is slowly getting back on its feet. And according to this heat map from FXCM, price movements for oil and gas futures have been on the rise, too. Over the past quarter, NGAS, or Natural Gas Futures, recorded a 27.86% growth, while US and UK Oil Futures have maintained an upward trend.
Stimulus packages are playing a big role in this recovery. For example, oil prices in the US got a major boost when the Biden administration proposed a $1.9 trillion (€1.59 trillion) package earlier this year.
But even with help, the energy industry’s recovery is not expected to be linear. In fact, Nature reports that countries across the EU may release a new host of lockdown restrictions to control the spread of COVID-19’s Delta variant.
And given the effect full lockdowns had on the energy industry in the early days of the pandemic, current prospects for recovery are likely to change soon.
For a while now, scientists have been raising the alarm: The world has less than a decade to lower its carbon emissions before global temperatures increase by 1.5 °C. Otherwise, humanity will experience the worst effects of the ongoing climate crisis.
And though many believe that the pandemic has helped lower said carbon emissions, the opposite is true. In fact, COVID-19 has impacted the planet’s health in other ways as well.
The pandemic has caused conservation efforts to dwindle, especially since most funding for this endeavor comes from tourism dollars. Consequently, illegal wildlife activities in the majority of African countries are going unnoticed, and almost 22 countries are finding reasons to cut environmental protection funds from their budgets.
As a result, experts and climate activists alike say that now is the time to start pushing harder for climate solutions. This includes transitioning world consumption to sustainable energy sources, something that the politics surrounding Big Oil had previously rendered near impossible.
In particular, scientists from all over Europe are pointing to stimulus packages as a way to boost sustainable energy ahead of Big Oil’s recovery.
Ultimately, they explained, the politics behind how these packages are appropriated will decide which kind of energy will benefit from the pandemic the most. And after making the world’s biggest green stimulus package to date, the European Union will be the entity leading the world in this shift.
This story first appeared on Sustainability Times
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