Covid-19: Will Big Oil emerge more powerful than ever?

 

Posted on April 9, 2020

Oil companies face severe problems now, but in the long run the industry giants may be bigger and even more dangerous to life on Earth.

Adam Hanieh teaches in the Development Studies Department at SOAS, University of London. He is the author of Money, Markets, and Monarchies (Cambridge University Press, 2018), Lineages of Revolt (Haymarket Books, 2013), and Capitalism and Class in the Gulf Arab States (Palgrave Macmillan, 2011)

The ecological dimensions of Covid-19 have become increasingly prominent in much recent discussion, with several important contributions exploring the pandemic in relation to capitalist agribusiness, widespread loss of biodiversity, and the destruction of natural ecosystems.

There is, however, a further element to Covid-19’s ‘ecology’ that deserves much greater attention: the ways the escalating pandemic intersects with, and is simultaneously acting to accelerate, a profound shock to the fossil fuel industry. Global oil markets are undergoing an unprecedented transformation as a result of this shock, and while longer-term trajectories remain open, this moment will undoubtedly shape the politics of oil — and the prospects of mitigating climate change — for decades to come.

With states representing over 90 percent of global GDP stuck under some form of lockdown, and the simultaneous shuttering of large swathes of global manufacturing, transport, industry, and retail — the demand for oil and oil products has dropped to historic lows. Indeed, it has been estimated that the reduction in US automobile use alone has led to an astonishing 5 percent fall in global oil demand — about the same as if the whole of Europe, Africa and the Middle East had simultaneously stopped driving.

The International Energy Association’s Executive Director, Fatih Birol, estimated on 25 March that global oil demand could fall by about 20 million barrels per day, a prediction that has now been revised up to 30 million barrels per day. This plunge in world energy use is unparalleled in both speed and depth, exceeding all other major crises of the last century — including the 1929 Depression and the 2008 global financial crash.

And just as energy demand is in free-fall, world oil supplies look set to significantly increase following an announcement in early March that Russia and Saudi Arabia would remove limits on oil production levels. Combined with the effects of the pandemic, this ‘Oil War’ has pushed global oil prices to multi-decade lows, and left producers rushing to find storage space on land and sea for their oil, rather than sell it at a loss. With global storage fast approaching full capacity, some oil traders are actually now expecting producers to pay them for taking oil off their hands.

…(read more).

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