COVID-19

Pandemic may be a turning point for oil business, executives and analysts say

Scott Tong Jun 9, 2020
Heard on: Marketplace
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Oil storage tanks in Carson, California. The use of fossil fuels dropped during the lockdown, and supplies piled up. Robyn Beck/AFP via Getty Images
COVID-19

Pandemic may be a turning point for oil business, executives and analysts say

Scott Tong Jun 9, 2020
Oil storage tanks in Carson, California. The use of fossil fuels dropped during the lockdown, and supplies piled up. Robyn Beck/AFP via Getty Images
HTML EMBED:
COPY

As carbon emissions and air pollution plummet, influential industry voices question whether we’ll return to our pre-COVID-19 driving and flying habits.

The CEO of Shell said in a new interview that “we have a core role to play in the energy transition” away from oil. BP’s chief executive reportedly told workers the pandemic has “accelerated and amplified” a company reorganization plan to lower carbon emissions. During an interview with IHS Markit as part of the consultancy’s CERAweek Conversations series, ConocoPhillips’ chairman and CEO said, “I would probably if I was a betting man today say it would be pretty difficult for [the United States] to return to 13 million barrels a day.”

Is COVID-19 a turning point for the oil and gas industry? Executives and analysts are watching several key factors that could accelerate change in the fossil fuel business.

First: global demand. So many people around the world have been forced to learn to work and play without driving or flying. “It’s hard to imagine how the aviation industry ever goes back to the rate of growth we have seen in the last two decades,” said Mark Lewis, head of sustainability research at BNP Paribas Asset Management.

The pandemic lockdown has shown “blue skies and clean air” in places like China and India, Lewis said. “This will leave a big impact on the psyche of citizens in the developing world and [put] extra pressure on policymakers.”

Another factor amplified by the pandemic: deglobalization. Countries have pursued vaccine research on their own, imposed export controls on face masks and ventilators and imposed travel bans. Companies in the medical space have pledged to make supply chains more regional.

Deglobalization could mean fewer international meetings and less flying and shipping.

“I think we’re seeing the broader forces of deglobalization, which is also accelerated by the COVID-19 crisis,” said Mark Finley, a fellow in energy studies at Rice University and a former senior economist at BP.

The oil industry is also under pressure from investors, given that fossil fuels have been the stock market’s worst-performing sector for years. Lewis said renewable energy stocks fetch double the price of oil shares.

“And if investors are telling you that they want to see more renewables investments rather than oil investments, you know the writing is on the wall,” he added.

Even before the pandemic, many major oil companies were moving to provide more environmentally friendly types of energy, including natural gas and wind. Whether the pandemic has sped up change is hard to know, Finley noted.

“For everyone in New York or San Francisco who wants to sit at home and work from home,” he said, “there’s somebody in the emerging world who aspires to own a car.”

COVID-19 Economy FAQs

With a slow vaccine rollout so far, how has the government changed its approach?

On Tuesday, Jan. 12, Health and Human Services Secretary Alex Azar announced changes to how the federal government is distributing vaccine doses. The CDC has expanded coronavirus vaccine eligibility to everyone 65 and older, along with people with conditions that might raise their risks of complications from COVID-19. The new approach also looks to reward those states that are the most efficient by giving them more doses, but critics say that won’t address underlying problems some states are having with vaccine rollout.

What kind of help can small businesses get right now?

A new round of Paycheck Protection Program loans recently became available for pandemic-ravaged businesses. These loans don’t have to be paid back if rules are met. Right now, loans are open for first-time applicants. And the application has to go through community banking organizations — no big banks, for now, at least. This rollout is designed to help business owners who couldn’t get a PPP loan before.

What does the hiring situation in the U.S. look like as we enter the new year?

New data on job openings and postings provide a glimpse of what to expect in the job market in the coming weeks and months. This time of year typically sees a spike in hiring and job-search activity, says Jill Chapman with Insperity, a recruiting services firm. But that kind of optimistic planning for the future isn’t really the vibe these days. Job postings have been lagging on the job search site Indeed. Listings were down about 11% in December compared to a year earlier.

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