What’s Going On Here?
This week, global oil price dipped below $16 a barrel for the first time since 1999. In the US, oil prices are negative for the first time ever at minus $37 a barrel! This means that oil producers (without access to storage space) actually began to pay customers to take barrels of the black stuff off their hands.
What Does This Mean?
This slimy situation is the result of a perfect storm for the oil industry. A price war between Saudi Arabia and Russia led to a glut of cheap oil on global markets, just as demand slumped due to the coronavirus lockdown (due to travel restrictions and the wider economic slump).
Experts predict that the world’s oil storage capacity will be full in a matter of weeks, triggering an oil market collapse that would force oil producers to shut their wells. In anticipation of this, even massive supertankers (able to carry 2 million barrels of oil) are being chartered for $335,000 a day to store the unwanted gloop.
Although prices have now stabilised somewhat, most experts predict prices to remain cheap for a while.
Why Should We Care?
In 2008, before the last recession, we saw similar patterns of an economic meltdown in oil. Experts say we should regard this as ‘the sick canary in a coal mine’ and expect the worst for our economy.
But… from a climate perspective, the thing that matters most is whether or not that supply ever reaches the Earth’s surface. So, here are the favourite solutions we’ve heard:
- Buy and shut down – With oil currently so cheap and unloved, what if someone maybe … bought those dormant pumping operations and shut them down for good? We are looking at you @LeonardoDiCaprio @BillGates @ArnoldSchwarzenegger
- A good time to tax – Low oil prices could provide a “good time to introduce a tax on fossil fuels,” according to Chris Stark, CEO of the government’s climate advisers the Committee on Climate Change. Lower wholesale prices could give politicians the cover to artificially hike the cost of polluting products, putting the UK on the right track for longer-term decarbonisation.
- Green power incentives – Investors scared by the unpredictability of oil prices could instead invest in wind and solar. Tighter regulations and extra incentives from governments could help accelerate the global switch to green power as businesses look to rebuild and adapt!
If governments don’t use the oil price slump as an opportunity to roll out low-carbon infrastructure and green incentives, then the world will soon return to business as usual.
But with such an uncertain future ahead of us, we think it’s important to help shape the world we want to live in. Here are our suggestions of how you can help:
- Invest in green energy – to help strengthen green energy solutions
- Support a green new deal/green transition for Europe following the pandemic