According to Dr Nakhle, today’s oil price crisis is not an oil market story but a global economy story, with the current challenge being a bigger one as it is not just a supply challenge but it has also seen a massive destruction of demand. Similarly, natural gas has been hit by the same forces that have affected the oil sector.
There is also a notable deceleration in the excitement surrounding the energy transition, compared to recent years. Like any other investment, investment in green energy is going to suffer as green energy typically requires government support. In an era when government budgets are squeezed, green investment outlook depends on the shape of the recovery: if it’s a V-shaped recovery, we go back to the pre-crisis enthusiasm. If it’s a slower economic recovery, green energy might face a harder time. Irrespective of the shape of the recovery, green energy will face tougher competition because of low oil and gas prices.
Dr Nakhle further highlights that there is a lot governments can do which can positively impact the investment climate, such as ensuring favourable fiscal regimes and licensing terms. However, before the crisis there was a mounting outcry against government support for the industry as a result of climate change concerns, with even fiscal incentives seen as subsidising the industry. In the USA, for example, some are calling for government support for the shale industry to be contingent on concessions to protect the environment, such as reducing flaring and the carbon intensity of production.
Read some of the key takeaways of the webinar discussion in the link here.
“The oil market crunch”, Dr Carole Nakhle, May 2020
“Oil in the energy transition age”, Dr Carole Nakhle, March 2020
“Energy Transition? Not So Fast, One Expert Says”, Lord Howell, Oct 2019
“US WTI prices move in negative territory for the first time in history”, Christof Rühl, Apr 2020