2020 has proven to be a challenging year for almost every kind of business, the oil industry included. As the year progresses and we start to look to the future, how will this sector fare as time and the situation moves on?
Covid 19 and the oil industry
Covid 19 and the shockwaves it has sent around the globe have affected almost every aspect of our lives. Work and leisure have been interrupted, travel banned, and socialising made impossible, not to mention the health implications for millions of people globally.
All of this has meant businesses paused, people left their cars on their driveways and cancelled travel bookings. Essentially, the lockdown ensured the demand for fuel plummeted and this had immediate, drastic implications for the oil industry.
Already suffering due to the popular shift towards renewable energies, this huge blow to the industry saw barrels of oil priced at negative value and petrol prices drop drastically. Many smaller petrol stations were forced to close as the financial situation became impossible for them to manage.
The feared impact on oil producing countries
However, it’s not just the petrol stations that are suffering. Back at the source, smaller countries that rely on producing oil for their economy are really feeling the impact. Not only are they contending with the health implications of Covid 19 and the devastating impact it is having on all kinds of businesses, but they have also seen their main source of income nosedive.
Every country that produces oil is suffering in this area, but there is fear that the situation could trigger political instability and poverty in the smaller countries whose finances are so tightly tied to oil prices.
Coming out of lockdown
However, there is some kind of light at the end of the tunnel for the oil industry. As some lockdown restrictions are eased and people start travelling more, the demand for fuel and oil increases. Already, the price of a barrel of oil has gone up and at-the-pump prices are increasing.
But that does not mean we are straight back to business as usual. The future is far from certain for the sector.
Prospects for the oil industry
At the moment, although renewable energies are becoming ever more popular, we are still reliant on oil. However, Covid 19’s dramatic impact on the sector has not gone unnoticed. It has changed how people view the industry’s stability and that will be difficult to shake off from an investment point of view.
Also, Norway-based consultancy, DNV GL, has predicted that global energy use will be 8% lower in 2050 than previously expected due to the impact of the pandemic. If true, that is hugely significant and has major ramifications for the oil industry.
Predicting the future
Without a crystal ball, it will be some time before we can look back and fully understand how Covid 19 has affected the oil industry. Similarly, it is next to impossible to predict how things will turn out, especially as we are still in the midst of a global pandemic and unsure what is going to happen week-to-week let alone in the distant future.
As with most industries around the globe, it may simply be a case of riding it out and waiting to see what the future brings.