Written by Ken Silverstein
Whiting Petroleum Corp. has succumbed to COVID-19 and the oil battle now taking place between Saudi Arabia and Russia. It filed for bankruptcy last week. Questions abound, ranging from how many more independent oil and gas operations could go under to what are the possible implications for energy markets.
Given the economic downturn — 7 million jobs lost in March alone — the demand for oil and gas will remain weak. That will cause prices to fall even further, perhaps as low as $20 per barrel. But the dip will be relatively short-lived. And while oil prices are expected to climb again, green energy’s future is now in limbo. With gasoline prices so low, the pressure is off to invest in alternative fuels.
“The sharp decline in the oil market may well undermine clean energy transitions by reducing the impetus for energy efficiency policies,” writes Fatih Birol, executive director of the International Energy Agency. “Without measures by governments, cheaper energy always leads consumers to use it less efficiently. It reduces the appeal of buying more efficient cars or retrofitting homes and offices to save energy.”
World leaders have a prime role here: Birol says that, globally, $400 billion in fossil fuel subsidies exists and that 40% of those are designed to make oil cheaper and more affordable. The International Energy Agency says that governments have the most leverage to drive energy investment.
And the agency credits policymakers for last year’s halt in global CO2 emissions — even as the world economy expanded by 3%; global emissions remained 33 giga-tonnes in 2019, which it attributes to the growing market share of wind and solar as well as the switch from coal to natural gas. It also praises the use of more nuclear energy generation. Emissions from the power sector alone fell to levels not seen since the 1980s as a result.
“We may well see CO2 emissions fall this year as a result of the impact of the coronavirus on economic activity, particularly transport,” says Director Birol. “But … this would not be the result of governments and companies adopting new policies and strategies. It would most likely be a short-term blip that could well be followed by a rebound in emissions growth as economic activity ramps back up.”
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