If you follow the oil industry — and if you live in Houston, you do — today’s dynamics seem downright nuts. Demand is collapsing amd surpluses are growing. So what’s the response of the world’s biggest oil producers? Flood the market with more oil.
The result is hardly surprising: a crash in oil prices to near $20 barrel. If 2019, when prices were mired in the range of $50 to $60 a barrel, was worrisome, then 2020 is frightening.
But perhaps more frightening is that the coronavirus crisis is providing a glimpse of the oil industry’s future of falling demand, growing surplus and low prices.
While the long-term decline in demand is unlikey to occur as dramatically as recent market movements, nearly every forecast says it’s coming. Some say demand could peak within this decade; others put it off until midcentury. But with the threat of climate change growing more dire and the electrification of the economy advancing, the peak and inevitable decline is nonetheless on the way.
This collapse in demand should be a wake-up call for an industry whose main product faces a diminshing future.
The industry has made some efforts toward toward the so-called energy transition — and made a big deal about it. You’ve probably seen ads about Exxon Mobil’s research into algae-based biofuels. At last report, the company was investing about $1 billion a year into alternative energy research.
That seems like a lot until you consider the company earned about $14 billion in 2019 and $20 billion in 2018, or the development of the first phase of its Liza oil field off the coast of Guyana was estimated to cost $4.4 billion.
Royal Dutch Shell is one of the industry’s leaders on climate and the transition to cleaner energy. As we reported last summer, Shell is opening hydrogen-fuel filling stations in California and investing millions of dollars in electric vehicle startups and biofuels. But that pales in comparison to what is spends on R&D to advance its fossil-fuel products.
One analysis by the London research firm CDP found that the industry as whole invested just 1.3 percent of R&D money into low-carbon technologies in 2018.
This latest collapse of oil prices perhaps signals that it’s time to pick up the pace in developing new products, whether its offshore wind, biofuels or other technologies. These type of transitions are never easy. Leaving behind old proven products to try your luck on new ones that may or may not succeed requires real courage.
While working in Washington, I had the opporutunity to cover the late Amory Houghton Jr., who was elected to Congress after running Corning Glassworks, when it was best known for its household products known as Corningware. Houghton, however, realized that the company could not compete in this product line with lower cost manufacturers overseas, particularly what was then a rising Japan Inc. He moved the company into fiber optics and other advanced products.
During a stint in Northwest, I remember apple farmers, adjusting to changing consumer tastes, tearing up orchards of red and golden delicious varieties, and replanting fujis, pink ladies and the many other varieties that today fill grocery store shelves.
Politicians sometimes say a crisis is a terrible thing to waste, meaning it drives people and institutions to make difficult changes needed for the future. Maybe for the energy industry this is such a crisis.
The old saying is it’s best to fix the roof when the sun is shining. But often, it takes getting wet before things get done.
rob.gavin@chron.com
twitter.com/thefuelfixer
"oil" - Google News
March 20, 2020 at 06:29PM
https://ift.tt/3dfM2EV
Will price collapse propel change in the oil industry? - Houston Chronicle
"oil" - Google News
https://ift.tt/2PqPpxF
Shoes Man Tutorial
Pos News Update
Meme Update
Korean Entertainment News
Japan News Update
Bagikan Berita Ini
0 Response to "Will price collapse propel change in the oil industry? - Houston Chronicle"
Post a Comment