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Covid 19 and oil extractivism


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Talk by Simon Pirani at a ScotE3 meeting on 10th May 2020

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Covid 19 and oil extractivism

  1. 1. Scot-E3 webinar Covid-19 and oil extractivism Simon Pirani Author of Burning Up: A Global History of Fossil Fuel Consumption Senior Research Fellow, Oxford Institute for Energy Studies @SimonPirani1 ■ 1
  2. 2. Covid-19 and climate crisis: aspects of the Anthropocene ► Johannes Vogel, director of Berlin Museum of Natural History, 9 April: “Our arrogant relationship with nature fuels, and even causes, many of humanity’s greatest challenges. The threats we face are interrelated: climate change, the loss of biodiversity and the emergence of entirely new pathogens that threaten us time and again.” ► We need to think in terms of inter-related threats, not about “when this [Covid-19 emergency] is over”. ►And we need to ask: who is “we”? These threats are generated not by undifferentiated humanity, but by a society divided by class and neocolonial power relations 2
  3. 3. Oil demand has crashed ►Oil demand in 2019 was 100.9 million b/d ►Demand in April 2020, implied estimates: 72 million b/d (Int’nl Energy Agency) 82 million b/d (US Energy Info Agency) 65 million b/d (Trafigura) ►Estimate of demand in 2020 as a whole: 91.6 million b/d (IEA) ►Output cuts agreed by OPEC+, from May: 9.7 million b/d (IEA) 3 81 82 83 84 85 86 87 88 89 90 91 92 2005 2006 2007 2008 2009 2010 2011 2012 Global oil use, million b/d What happened in the last recession
  4. 4. Crude oil prices: the G20 / OPEC+ deal did not stop the fall, but China recovery may do 4 Oil The main driver is demand collapse, caused by coronavirus and the resulting economic crash 9 March. OPEC+ fails to reach agreement 12 April. Deal on 10% supply cut brokered by G20
  5. 5. 5 Demand for oil products has fallen through the floor Source: Financial Times, 2 April ■ At the end of March, global road transport was 50% down year on year (IEA) ■ Globally, car manufacture looks like it will be 20% lower this year than last
  6. 6. Aviation and just-in-time supply chains ►More than 60% of commercial aircraft are grounded ►Delta Airlines, the world’s largest airline, says it is losing $60 million a day ►Boeing cut production by one third in April ►Just-in-time supply chains, designed for low-cost efficiency but not sustainability, have been disrupted 6 ►Daily international flights down by 87% since January
  7. 7. Greenhouse gas emissions likely to fall by 2 billion tonnes (5%+) this year ► “Even this would not come close to bringing the 1.5C global temperature limit within reach. Global emissions would need to fall by some 7.6% every year this decade – nearly 2,800 million tonnes of CO2 in 2020 – in order to limit warming to less than 1.5C above pre-industrial temperatures” – Carbon Brief ►Demand for coal and gas (used to produce electricity and heat, and for industrial processes) has fallen less sharply than for oil (used for transport) ►Society’s need to transform industry, agriculture, urban built environments and transport systems will certainly survive Covid-19 7
  8. 8. Oil industry consolidation ►International oil companies are slashing investment, laying off workers … and preparing to swallow smaller rivals ►US shale producers, already heavily in debt, may not survive Covid-19. Whiting Petroleum is bankrupt ► “They [Exxon and other IOCs] prefer all the independents to go bankrupt and pick up the scraps.” - Scott Sheffield, CEO of Pioneer Natural Resources, DeSmog Blog, 27 March ►”We face the very real danger of an emboldened and resurgent oil industry, positioned ever more centrally within our political and economic systems. Such an eventuality would be a disastrous outcome to this current pandemic” – Adam Hanieh (author, Lineages of Revolt: Issues of Contemporary Capitalism in the Middle East), 9 April 8
  9. 9. The impact on producer nations Fiscal breakeven price = the price the nation’s government says is needed to balance the budget. Graphic from PM News, Nigeria 9
  10. 10. The impact on producer nations ► Russia balances its budget at about $40/barrel, and has $170 billion in sovereign wealth fund ►Saudi Arabia, Qatar, Kuwait and UAE have substantial cash reserves … but even they are borrowing, and cutting spending ►Algeria announced 30% budget cuts; Iraq says half public-sector wages are in danger ►Nigeria has made budget cuts, devalued the naira, considered junking petrol subsidies and sought $7 billion emergency loans ►Pemex of Mexico, already heavily indebted before the Covid-19 emergency, is in financial trouble 10
  11. 11. The North Sea ► “Our current estimate is that up to 30,000 jobs could be lost over the next 12–18 months” – Oil & Gas UK, 28 April ►BP has put Clair South project on hold. Final investment decisions on the Jackdaw project (Shell) and the Platypus project (Dana Petroleum) have been postponed. ►”We need government support” – Ross Dornan of Oil & Gas UK. (Really? And did the royal family say, “we need free money”, too?) ►The Sea Change report (published last year by NGOs) argued that any serious approach to tackling climate change involves ending subsidies to North Sea production and winding down production ►That raises the question of “just transition” away from oil & gas 11
  12. 12. Thoughts on the longer term ►When, and to what extent, oil demand will recover is unclear. Capitalism’s tendency to expand aggressively as it emerges from crises it has created is clearer ►Some mainstream commentators think the jolt to rich-world use of cars and airplanes is strong enough that oil demand will never return to the 2019 level ► This may be. But changes to economic structure on a much greater scale will still be needed to tackle global warming ►People in oil producing countries outside the rich world will be hard hit by the economic depression. The logic of “keep it in the ground” has never been stronger 12
  13. 13. Published August 2018 "Insightful, precise and well-written, Burning Up turns energy consumption on its head. Pirani fills a crucial gap ... Anybody fighting climate change should read this" - Mika Minio-Paluello, campaigner at Platform London and co-author of The Oil Road: Journeys from the Caspian Sea to the City of London (Verso, 2013) "This meticulous depiction of how fossil fuels are woven into our human systems - not only technological but also economic, social and political - is an invaluable aid to getting them back under control" - Walt Patterson, author of Electricity vs Fire (2015) "Explains the technological, social and economic processes that have prioritised a particular way of satisfying society's demand for energy services" - Michael Bradshaw, Professor of Global Energy, Warwick Business School, UK, author of Global Energy Dilemmas (2013) @SimonPirani1 ■ 13