The scoop The price of crude oil plummeted following the outbreak of the novel COVID-19. As 2020 began, Brent crude oil - the global oil benchmark - cost $64/barrel. By April 21st, 2020, the price had dropped to $17/barrel. What happened?
Future of Oil
- The volatility and steep decline in oil prices may lead some producers to shut down operations. Shale oil extraction pioneer Chesapeake Energy recently declared bankruptcy. Many oil giants are delaying expansion projects.
- Investors are now less inclined to invest in oil & gas -- lower prices = greater risk, less profit. Energy was the worst performing sector in the S&P 500 index for four out of the last six years.
Environmental impact Climate awareness already poses a threat to Big Oil. With this economic crisis, investors might turn to renewable energy. Renewables are more price stable, cheap, and cost-competitive, even during low prices of oil.
Bottom line It’s impossible to predict the future. Big Oil will certainly survive the pandemic, but its century-long domination of energy may soon end. One thing’s for sure -- clean technology has a strong outlook, and can certainly give oil and gas companies a run for their money. Not only from its greenness, but also in its economics.
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