Due to the global impact of the COVID-19 on the worldwide energy sector, the oil prices and demand drop dramatically. Still, it may open the door for an opportunity in the renewable energy sector.
Before Covid19 was announced a pandemic by the World Health Organisation, the oil and gas sector was already exhibiting a negative impact on its operations. It is because of the heightened importance of climate change.
With the new situation now where Saudi Arabia and Russia are flooding the market with oil as coronavirus threatens demand, oil prices have crashed below the $20 mark. Due to this price crash with severe consequences, there is a possibility of a global transition to cleaner energy.
Before the issue of COVID-19, the oil and gas sector was already feeling negative repercussions on its operations, due to increased emphasis on the importance of climate change.
As stated by the CEO of the trade association, Oil & Gas UK, Deirdre Michie, the outbreak has only worsened the previous issues. “Many of the companies in our industry, particularly in the supply chain, are still financially weak after the previous oil price crash, so the triple curse we now face is particularly serious.”
It has been projected that oil demand will decline dramatically in the first quarter of this year following the outbreak of the pandemic, as stated by the law firm- McCarthy Denning.
For example, NASDAQ Stock Exchange-listed hydrocarbon exploration company, Diamondback Energy, which operates its headquarters in Midland, Texas, declared a reduction in company activity on 9 March, and its share price dropped by over 50% last month just like others in the businesses.
Faith Birol- the executive director Institute of Economic Affairs (IEA), highlighted that the “visible decline in the oil market,” but emphasized that “the recent abrupt drop in oil prices is likewise a great possibility for countries to lower or remove subsidies for fossil fuel consumption.”
Before the outbreak, according to a professional services firm Deloitte they already predicted in its 2020 renewable energy industry outlook, the renewable energy sector would be entering a “new growth phase” in 2020.
But, IEA’s Birol also affirmed: “The coronavirus accompanies other threats for clean energy transitions. China, the country most massively affected by the virus originally, is the principal global production source of several clean energy technologies. Like solar panels, wind turbines and batteries for electric cars. Their economy was seriously obstructed when the government is trying to hold the virus, which causes potential supply chain bottlenecks for some technologies and parts.”
That’s why governments need to ensure to hold clean energy transitions in front of mind as they respond to this fast-evolving crisis.”