Pandemic may be a turning point for oil business, executives and analysts say
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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
Millions of Americans are unemployed, but businesses say they are having trouble hiring. Why?
This economic crisis is unusual compared to traditional recessions, according to Daniel Zhao, senior economist with Glassdoor. “Many workers are still sitting out of the labor force because of health concerns or child care needs, and that makes it tough to find workers regardless of what you’re doing with wages or benefits,” Zhao said. “An extra dollar an hour isn’t going to make a cashier with preexisting conditions feel that it’s safe to return to work.” This can be seen in the restaurant industry: Some workers have quit or are reluctant to apply because of COVID-19 concerns, low pay, meager benefits and the stress that comes with a fast-paced, demanding job. Restaurants have been willing to offer signing bonuses and temporary wage increases. One McDonald’s is even paying people $50 just to interview.
Could waiving patents increase the global supply of COVID-19 vaccines?
India and South Africa have introduced a proposal to temporarily suspend patents on COVID-19 vaccines. Backers of the plan say it would increase the supply of vaccines around the world by allowing more countries to produce them. Skeptics say it’s not that simple. There’s now enough supply in the U.S that any adult who wants a shot should be able to get one soon. That reality is years away for most other countries. More than 100 countries have backed the proposal to temporarily waive COVID-19 vaccine patents. The U.S isn’t one of them, but the White House has said it’s considering the idea.
Can businesses deny you entry if you don’t have a vaccine passport?
As more Americans get vaccinated against COVID-19 and the economy continues reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.
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