The COVID-19 pandemic is a watershed moment in our history. One of its biggest impacts has been and will be on the energy sector. Many have long been questioning the future of oil and gas, as well as the rise of renewables, and COVID-19 could be an accelerator for an energy revolution. But the future of energy is far from clear. There are many economic, political, and environmental factors at play when it comes to the worlds of oil and renewables.

The onset of the pandemic led to plummeting oil prices and economies forced to a standstill. Numerous jobs are now being done from home remotely, but the Dallas Fed has reported that over 60% of the workforce cannot work remotely. Many people have been laid off, furloughed, and left uncertain about their future. There are many examples of this, including Royal Dutch Shell having to cut refinery activity by up to 40%. Investors have been forced to reassess the risk in financing oil and gas. This could lead to drastic changes in the industry’s future.

Oil companies and other markets are preparing for a severe economic downturn and reduced activity that may not recover until 2021 or beyond. Companies will be restructuring themselves by closing locations and laying off employees. It is anticipated that the pandemic will help with the transition to green energy. As more workplaces opt to have employees work from home, there will be less demand for gas. Governments will be providing stimulus packages to help these companies recover in the coming years; a lot of these funds could be diverted from oil and towards renewables.

The transition from oil to renewable energy sources has been occurring for years, albeit at a very slow pace. Nevertheless, the world is far behind the Paris Climate Agreement targets needed to minimize the damage of the climate crisis. COVID-19 could help accelerate progress towards these goals. On one hand, as economies begin to reopen, governments will be providing stimulus packages to help companies remain afloat. A lot of these funds could be diverted away from oil and towards renewables.

Conversely, oil and gas are still the dominant power sources for vehicles, heating, and other facets of our day-to-day lives. As commuting, flights, and other activities resume, low oil prices may encourage companies to resort to the energy sources they are already familiar with. The clean energy sector is also facing economic struggles, and these organizations have significant costs to set up and maintain wind turbines, solar panels, and more. As the economic recession leads to increased debt, it will be harder to invest in these projects.

Even with the reduced carbon emissions from the COVID-19 pandemic, the world is still far short of the reductions needed to prevent catastrophe. Drastic changes are needed and the oil industry cannot continue long-term. With the growing awareness of the urgency of renewables, this is the time to invest in green energy and seek out green jobs. Humanity cannot afford otherwise. The COVID-19 pandemic will ultimately pale in comparison to the climate crisis.

Sources:

Bakx, Kyle. “COVID-19 wipes out demand for fossil fuels – will they bounce back?” CBC. https://www.cbc.ca/news/business/covid-19-oil-gas-energy-transition-1.5552794

Clemente, Jude. “Why U.S. And Natural Gas Demand Will Rebound From Coronavirus.” Forbes. https://www.forbes.com/sites/judeclemente/2020/05/17/why-us-oil-and-natural-gas-demand-will-rebound-from-covid-19/#77663156a065

Lorinc, Jacob. “COVID-19 brought the oil business to its knees. Is it time for investors to turn to clean energy?” The Star. https://www.thestar.com/business/personal_finance/2020/04/27/covid-19-brought-the-oil-business-to-its-knees-is-it-time-for-investors-to-turn-to-clean-energy.html