The current crisis could spell the end of fossil fuels or at least their dominance.
The oil market hit unprecedented lows in April, prompting some to wonder if the industry would ever be able to fully recover. With the cost of a single barrel of oil briefly dipping into negative numbers, it’s safe to say that this was the roughest period in the modern history of the market.
The current crisis could spell the end of fossil fuels, and while that would create hardships for many people in the industry it would also be a positive development from an environmental standpoint.
The case is clear. Owing to the global pandemic demand for oil has largely dried up and with all the lost production capacity demand likely won’t be able to be met, at least for a while, if and when it spikes again. These conditions make for a scenario that raises the specter of a permanently damaged fossil fuel industry.
But is there actual evidence — aside from those April numbers — for the end of oil?
Purely from a market perspective, it’s difficult to say. Right now crude oil remains the most traded commodity in the world. And while investors were negatively impacted by the April drop-off, they don’t appear to be abandoning the market just yet.
Recent charting indicates some 79% of people with relevant trading interest looking to buy oil, rather than unload it. This may just mean that investors are keen to capitalize on low prices in the hopes of a recovery, but one way or another it shows a degree of market confidence. Whether or not that confidence is well founded is impossible to say right now. But traders remain bullish about oil.
When we consider real-world demand, though, there is some more intriguing evidence to consider. Most significant is the state of necessary transportation, which ultimately accounts for so much of the world’s oil consumption. From day-to-day commutes to international flights, business and leisure travel has largely evaporated around the world over the past few months.
When it will return to its pre-pandemic levels is anyone’s guess. Recently, representatives from Goldman Sachs predicted that oil demand will bounce back, but could be hit hard by the lack of business travel. The focus of those comments was primarily on jet travel, but it’s possible that business transportation of all kinds may be permanently changed.
Lots of companies are already discussing the potential of sticking with work-from-home options even after the pandemic. Twitter CEO Jack Dorsey has announced that the company’s employees can work from home permanently if they prefer to do so. That sort of initiative at numerous companies all over the world, employing millions, could minimize business travel in ways that could impact the oil industry.
Compounding the potential migration away from day-to-day business commuting is the fact that some of the world’s biggest cities are already working to provide alternative options. Specifically, cities are adding bike lanes currently as a way to give citizens places to go while maintaining healthy social distance but ultimately as alternative commuting options.
Notably, officials in cities like Milan and Paris have already made clear that their new cycling and pedestrian paths are meant to be permanent. They were conceived in part to keep air pollution levels down, given the telling data that have shown decreases in pollution during lockdowns. What this means is that in some of the busiest business centers in the world, even those who do continue to commute to work may do so with little need for fuel.
Meanwhile, progress is being made toward alternative fuels and more widespread use of electric vehicles. Estimates vary greatly as to when a majority of cars will be electric or when certain alternative transportation methods will become fully viable. The general direction of progress is undeniable, however. It’s conceivable that a true boom in ecofriendly transpiration will emerge at the worst possible time for the oil industry.
In all likelihood, none of these factors will truly spell the “end” of oil any time soon. However, it is also foolish to look at the industry’s current struggle as an entirely temporary one. It could be that a combination of shifting societal behavior, new urban planning, and emerging technologies will keep the oil industry from ever making a full recovery.