As you probably heard this week, the price of oil has actually crashed below $0 for the first time in history. At a time when the world needs to transition from fossil fuels to avoid the even bigger catastrophe of climate change, what does the state of the industry mean for the climate?
Some climate activists suggest that oil is cheap enough that the government or philanthropic organizations could take over failing companies and then shut them down. That may not work very well. As this Bloomberg column points out, the cost is still significant—retiring Whiting’s debt would cost nearly $3 billion. And buying oil or gas company assets wouldn’t necessarily stop production since those companies typically lease mineral rights from other landowners who could theoretically later sell those rights to someone else.
Still, the current situation could help speed the transition away from oil and gas. Normally, cheap oil would lead to more oil use, but since the pandemic has forced travel to drop dramatically, there isn’t as much use for oil. Many companies may realize that remote work is a plausible long-term option and the number of people commuting each day may shrink. Work that once involved frequent plane trips may continue to rely more on videoconferences even after the risk of infection has fallen. As consumers deal with tight budgets, they may decide to wait a couple of years before buying their next car; that could coincide with a point when it’s suddenly cheaper to buy and use an electric car than one with an internal combustion engine.
Will the recovery after coronavirus embrace the necessary green technologies of the future? This we are not sure of, but the hope is that the drastic drop in oil prices will show us that we need something that is not only more stable but also cleaner.
