Energy And Transportation Sectors Feel Ripple Effects of Coronavirus – Will There Be Climate Benefits?

Photo: Jason Redmond, Reuters via the WSJ

Oil and gas producers are being impacted by the spread of COVID-19 as Conoco-Phillips has canceled the travel of hundreds of workers who shuttle up to the oil fields on the North Slope of Alaska while workers currently there work an additional week, and in North Dakota the oil and gas commission is considering banning operators from either selling more unwanted Bakken crude oil or even forcing them to abandon wells completely.  The airlines are considering “floating storage” on tankers at sea for excess jet fuel as a short term solution to the supply glut associated with reduced air travel, and the federal government’s highway-safety agency suspended the rules that limit daily driving hours for truck drivers in order to speed delivery of medical equipment, hand sanitizer, and food in response to the nationwide coronavirus outbreak.

Why This Matters:  The up and down sides of the scrambled new world order are coming into focus.  The energy price war continues to lead to cuts in production, which was badly needed for climate change purposes.  Big banks like JP Morgan and Citi may have a reckoning ahead since they fueled much of the pumped-up supply – they invested $2.7 trillion in those fossil fuel companies most aggressively expanding production since the Paris agreement, according to The Banking on Climate Change 2020 report out this week by a number of prominent environmental groups. Storing jet fuel in tankers at sea and allowing sleepy truck drivers to take over the highways seem like recipes for disaster that could have huge negative environmental and safety impacts. We need a whole of government approach that minimizes these risks and moves to reduce permanently oil and gas production now while it makes economic sense.

The Banks Pumping Up Oil and Gas

The report’s most disturbing finding was about the banks’ practice of aggregating financing for the 100 companies that were aggressively planning new coal, oil, and gas extraction and related infrastructure. The groups found that of the $2.7 trillion in fossil fuel finance, $975 billion went to these companies — financing for these top 100 expanders skyrocketed 40% from 2018 to 2019.  At times of low prices, often oil and gas demand increases, but COVID-19 may disprove this logic.

Arctic oil and gas production has become an investment that is being eliminated by banks — but COVID-19 may also play a role in reducing production if there continue to be interruptions to transporting workers to the Arctic oil fields, all of which is good news for climate change.  Similarly, slowdowns in the production of dirty oil from the Dakotas and fracking in the Permian Basin of Texas would be welcome news, as long as the government can keep production from surging again.  In the “tar sands sector” according to the environmental NGO’s report “bank financing has fallen since 2017, though 2019 levels remain higher than 2016.”  And in order to get rid of excess jet fuel, oil and gas companies may begin to mix it into diesel gas, which is more profitable right now, but ultimately this is another way to prop up the oil and gas market.

H/T to my brother Ted M who is keeping the supply chains intact — make sure those truckers get enough sleep!

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