In the not-so-distant past, renewable energy and fossil fuel divestment were part of an idealistic, pie in the sky approach to transforming the energy sector which, for all of its positive attributes, simply didn’t make a lot of financial sense. In a world awash with cheap shale and natural gas after the United States’ shale revolution, moving away from fossil fuels seemed like a pipe dream. And then a pandemic hit. The novel coronavirus has completely changed the way that we consume energy around the world, and took a huge bite out of global energy demand. In what some are already referring to as “Black April,” crude oil prices did the unthinkable and plummeted below zero, with the West Texas Intermediate benchmark ending April 20th at nearly $40 in the negative. The shale sector still has not recovered.
The COVID-19 pandemic has already transformed the global economy (and especially the energy sector) and it’s far from over. We’re likely headed into a yearslong economic recession worldwide, and governments and leaders around the globe are currently rushing to put together economic recovery packages that make sense in this new landscape. And it looks like moving away from fossil fuels might be a huge part of this new economic transformation.
According to many experts, these new “green” stimulus packages present the world with an unprecedented and unmissable opportunity to redirect the global economy toward decarbonization and construct what the World Economic Forum has advocated as a “new energy order” and a “great reset.” Not only will this pivot be essential for meeting greenhouse gas emissions targets set by the Paris climate accord, it will also help end the recession sooner. Earlier this summer, PV Tech reported on “a raft of new studies” which has “come to underscore the business case of pushing renewables to the heart of the COVID-19 recovery, amid claims green energy plays offer a low-cost, high-return opportunity for investors.” Then, in August, MacArthur ‘genius’ Saul Griffith’s organization Rewiring America backed these findings up and “made its big debut with a jobs report showing that rapid decarbonization through electrification would create 15 million to 20 million jobs in the next decade, with 5 million permanent jobs after that.” Related: Growing Crude Inventories Put A Cap On Oil Prices
And that’s just in the U.S. Overseas, green jobs and green tech are equally promising sectors for economic recovery and jobs creation. In fact, in the United Kingdom, it has been reported that accelerating a planned ban on the sale of new cars that run on gasoline and diesel --including hybrid vehicles-- would “create a £4.2bn boost to the economy and 30,000 new jobs.” This data comes from a new report by Cambridge Econometrics. These jobs would be created “across a range of sectors directly linked to the rapid transition to electric vehicles.”
According to British news outlet This is Money, this proposed ban is currently not set to take effect until 2040, but experts like those at Cambridge Economics believe that it’s foolish to wait. Instating the ban in 2030, ten years early, the report finds, “would have enough of an impact to reduce emissions enough to enable the government to meet its current legally binding climate commitments.” Some politicians have already gotten behind the initiative to accelerate the motion, which is “widely expected to be brought forward as MPs try to force the hand of the Prime Minister.”
The creation of new economic sectors is needed now more than ever as huge numbers of people around the world are out of work with limited prospects. As governments race to design stimulus packages, it could be tempting to fall back on tried-and-true economic sectors like fossil fuels, but the data simply is no longer there to back it. Forward-thinking jobs creation in sectors like electric vehicles and renewable energy is no longer an idealist’s dream--it’s the pragmatic choice.
By Haley Zaremba for Oilprice.com
More Top Reads From Oilprice.com:
- Growing Crude Inventories Put A Cap On Oil Prices
- EIA Sees WTI Crude Averaging $44 In 2021
- OPEC+ Getting Closer To Hatching January Plan
A new study titled:” Electric Vehicle Penetration and Its Impact on Global Oil Demand Survey by Columbia University’s Centre for Global Energy Policy, puts a special focus on the link between EV spread and oil demand. But this comes with a warning that policymakers and shareholders overestimate how quickly the global oil demand trajectory can flatten and decline.
It is claimed that policy actions to support de-carbonization and lower-emission transportation in the post-pandemic world could accelerate global energy transition and displace larger volumes of oil demand for road transport to the point of bringing peak oil demand closer than previously anticipated.
Rather than bringing peak oil demand closer, the COVID-19 pandemic has irrevocably proven that oil and the global economy are inseparable. Destroy one you destroy the other and vice versa.
The global economy will continue to run on oil and gas throughout the 21st century and probably far beyond. Furthermore, EVs will never prevail over ICEs. As a result, ICEs will continue to be the dominant means of transport well into the future.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
The promise of twenty million jobs in the EV industry is a bit optimistic at a time when we have 1.6 million (August 2020) electric cars in the USA (1 million full electric), or 5.6 million globally. Electric car sales would need to go up from ~2 million/per year by a factor of >20 X, which at some point put quite a strain on available lithium.
Regardless, these sectors have real potential for growth. For investor promise of guaranteed profits from the government, subsidies may be very profitable. Those who believe in the "zero-carbon within a few decades" story are likely to be disappointed unless there is a major breakthrough in scalable energy storage.