IS THE END OF "BLACK GOLD" NEAR?

                                                                     

                       …The Amazon Falcon coming under the Golden Gate Bridge

The demand for oil has cratered, as have the prices

This is a different kind of article from me, but I thought it might be appropriate for the times.

Recently in the San Francisco bay, where the giant Amazon Falcon oil tanker had been docked for weeks, a large Greenpeace banner had been unfurled.

The banner said: “OIL IS OVER!  THE FUTURE IS UP TO YOU!”

So, what does that all mean?

Well, first, the oil industry has turned the ocean into a parking lot facility since early last May. 

Oil tankers all over the world had been storing 360 million barrels of the “Oil Glut” that had been collecting since last March.

Today, the oil industry is in a tail spin.

The demand for oil has cratered and the prices have collapsed.  BP, Chevron, ExxonMobil and Shell are taking on billions of dollars in losses, while smaller companies are declaring bankruptcy.

It is clear that the oil industry will also not be recovering from the Covid-19 issues, nor returning to its former self, probably ever.  In fact, will it actually survive?

So far it’s been the government subsidies and the bail-out programs that have provided the life-line to the industry.

With the current agenda of pressures to double-down on dirty fuels, and with all the green programs that keep fossil fuels in the ground, the industry could shrink to a fraction of its former self....let's hope.

With these decades of organizing against the industry, it is expected to continue to cut the demands on production as renewable energy becomes more accessible and affordable. 

The cost of a barrel of oil has gone from a high of $148 in 2008, which sparked the Great Recession.  It then dropped to just $60 in 2011.  The demand for oil world-wide in 2015, was two and a half times more that it was in 2019.

But despite this drop in demand, they kept pumping the black stuff out of the earth...?

Since then the investors have been in a nosedive.  Between 2012 and 2017, BP’s profits dropped by 68%, Chevron’s by 65%, ExxonMobil’s by 56%.and Shell’s by 50%.  In December 2019, Chevron wrote-off $10 billion in losses.

It was a flood of cheap money and easy credit that was keeping the oil industry afloat.  In the Wall Street Journal in 2019, Raoul LeBlanc of HIS Marketing said that the, “Oil companies don’t have the ability to borrow anymore.”

There has been a loss of confidence with the oil investors and there was an estimated $11 trillion in commitments to sell-off oil, gas and coal holdings by late 2019.  This also caused a demand to stop any financing of any fossil fuel projects.

But the oils producers, for some reason, just kept drilling and pumping.  This caused a boom in the oils states of Colorado, New Mexico, North Dakota, Ohio, Oklahoma and Texas, which caused the massive over supply, and the cost of oil went to a minus (-) $40 a barrel, the lowest ever.

It was so bad, in Oklahoma, they declared oil an “Economic Waste”.

Finally, OPEC and Russia began to back-off their production, and the supply had dropped to 12 million barrels a day, or down by 13%, but the demand had dropped by 26%.

The result was that in the US, oil and gas jobs dropped by more than 100,000 jobs.

Shell has announced that it will slash $22 billion of its assets.  BP is selling $15 billion in assets, including its petrochemical business.  These companies loss of jobs world-wide is estimated at an additional 10,000 jobs.  55 oil companies have announced that they will cut more than $37 billion in spending.

The International Energy Agency has urged governments to: “reboot their economies with $3 trillion in investments away from fossil fuels, to a cleaner energy future.”

The idea is to transition the former oil-dependent workers to well-paying, unionized green energy jobs.  They are proposing to provide financial support for hiring oil and gas workers that have a history of dealing with a fluid that runs through pipes to rebuilding and maintaining failing water and sewage system lines.  Also, to help in shutting down the fossil fuel wells and their systems and operations.

The reality is that we must do what is necessary for dealing with the negative effects of climate change.  The latest calamities and effects from worsening droughts, floods, hurricanes, fires, and of course diseases such as Covid-19.

As the banner said, the choice is up to us.

Copyright G. Ater 2020