Top Ten Stories of 2020: Oil and Gas’ Really Terribly Awful Bad Year

Photo: Jim Evans, Wiki Creative Commons

When 2020 began, even with oil prices relatively strong, many industry analysts were predicting it was the beginning of the end for oil and gas.  The Houston Chronicle reported on January 5th that, “concerns are mounting in the oil and gas industry that peak demand is not only coming, but coming faster than anticipated, all as the shale boom begins to slow, companies slash jobs and Wall Street turns its back on the energy sector after years of generating lackluster returns.”  And then the pandemic hit and the Saudis and Russians decided to take advantage of the downturn.  With supplies still high and demand declining, the industry may never be the same again.

Oil and gas prices went through the floor in April and May — at one point oil futures trading was in negative territory — meaning sellers were paying people to take their oil rather than the other way around.  Meanwhile, the future is much brighter for renewables.  Ellen Hughes-Cromwick a Fellow at Third Way told ODP, “Clean energy will not fall down on an oil sword even as those prices collapse in the commodity markets. In fact, investors are voting with their feet: wind, solar, and renewables Exchange Traded stock market funds are still gaining value while oil stocks are getting hammered.”

In February, during the show “Squawk Box,” CNBC Market Analyst Jim Cramer said oil and other fossil fuel stocks had “the stigma attached to investing in tobacco companies.”  According to Cramer, young people’s views are having an impact — “This has to do with new kinds of money managers who frankly just want to appease younger people,” Cramer said. “We’re starting to see divestment all over the world.”  By the end of the third quarter, ExxonMobil reported a net loss of $680 million, compared to a $3.2 billion profit at the same time last year. The loss may prove to be the industry’s largest write-down in over a decade. ExxonMobil in 2013 was the largest company in the world, but since 1980, its global workforce has plummeted from 390,000 employees to less than 70,000.

Bankruptcies and government “welfare” for fossil fuel companies were plentiful.  In what one tax watchdog called a “stealth” bailout, dozens of oil and gas companies took advantage of provisions in the CARES Act to write off losses right away and get an immediate tax refund against prior years’ earnings going back to 2018, according to Bloomberg News Eventually, despite the bailouts, some of the largest oil and gas drilling companies went under — companies like  Valaris — because they were drowning in debt due to plummeting prices and too much borrowing against future production.

And cities and environmental groups sued the oil and gas companies repeatedly for having misled the public and investors for decades about the climate risks that it was well aware of, for having failed to prepare for climate risks such as storms and flooding, and for harming the futures of children worldwide.

The end really could be near.  In the space of a few decades, oil and gas companies will be like the hard rock mining companies of the 19th century — their empires will crumble, but their dirty environmental legacy won’t fade anytime soon. We will be dealing with cleaning up their messes for decades.

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