Could Corona Herald Peak Carbon?

April 20, 2020

Market Watch:

In 2008, the U.S. economy went into its deepest recession since the Great Depression, brought low by reckless financial institutions, deregulation, and lax regulatory enforcement. The recession led to millions losing their homes to foreclosure. 

The federal government could have stepped in and rescued struggling homeowners. That would have kept families in their homes, and preserved the tax base and social fabric of communities. 

Instead, they handed out $700 billion in public money to the very banks responsible for the crisis (not counting more than $3 trillion in zero or very low interest rate loans), allegedly because that was the only way to avert a deeper recession. But the recession worsened, and the “too big to fail” banks became even bigger.

This scenario is replaying itself today, with even higher stakes. We’re facing down not just a pandemic and a global economic meltdown, but an unraveling of our planet’s entire life support systems. 

The pain, in other words, is being felt first and worst by low-wage service workers, who are economically insecure to begin with. When they lose their jobs, they face the prospect of eviction or foreclosure, losing health coverage, energy and water utility shutoffs, and other dire consequences.

But Trump administration and Republican Senate, which have taken huge sums from the fossil fuel industry, are using the possibility of a recession to bail it out. The proposals include a purchase of 30 million barrels of oil (an amount that could go up to 77 million barrels) for the Strategic Petroleum Reserve, an emergency stockpile of oil held by the U.S. Department of Energy. 

Other proposals reportedly being considered include low-interest loans and trade barriers.

This is an outrage.

For starters, the problems of the U.S. oil and gas industry are largely self-inflicted. 

The current oil price slump is occurring at a time of already low prices, for which U.S. overproduction is largely to blame. The U.S. is now the world’s largest producer of both oil and gas, and is expected to account for 70% of the increase in global oil production and 75% of the growth of liquefied natural gas trade over the next 5 years.

And much of this oil and gas production binge has been fueled by debt, based on promises of future profit that haven’t materialized.

So let’s not blame a virus, or Russia, or Saudi Arabia. If U.S. oil and gas producers are in trouble, they are the ones at fault, and it takes nerve on their part to ask the government for a handout. While oil and gas workers facing layoffs deserve assistance, their undeserving bosses do not.

CNBC:

The coronavirus crisis will likely lead to the largest ever decline of global carbon emissions on record, according to research from Goldman Sachs, illuminating the potential for a long-term low carbon recovery.

The Covid-19 outbreak has meant countries around the world have effectively had to shut down, with many governments imposing draconian restrictions on the daily lives of billions of people. To date, confinement measures have been implemented in 187 countries or territories in an effort to try to slow the spread of the pandemic.

A side-effect of these measures, which vary in their application worldwide but broadly include school closures, bans on public gatherings and social distancing, has been a dramatic fall in the level of global carbon emissions.

Analysts at Goldman Sachs said in a research note that they expect energy-related carbon emissions (which account for two-thirds of total greenhouse gas emissions) to fall by at least 5.4% this year alone.

To be sure, that’s roughly five times that of previous crises, with the potential for “much larger” declines depending on the length of disruption to the transportation sector and industrial activity.

“Energy-related emissions have always rebounded post crisis,” analysts at Goldman Sachs said, citing data which showed carbon intensity improvements in the year after every major crisis since the 1970s.

“This time could be different as we have potentially already reached peak energy-related carbon,” they added.

Guardian:

The plunging demand for oil wrought by the coronavirus pandemic combined with a savage price war has left the fossil fuel industry brokenand in survival mode, according to analysts. It faces the gravest challenge in its 100-year history, they say, one that will permanently alter the industry. With some calling the scene a “hellscape”, the least lurid description is “unprecedented”.

A key question is whether this will permanently alter the course of the climate crisis. Many experts think it might well do so, pulling forward the date at which demand for oil and gas peaks, never to recover, and allowing the atmosphere to gradually heal.

The boldest say peak fossil fuel demand may have been dragged into the here and now, and that 2019 will go down in history as the peak year for carbon emissions. But some take an opposing view: the fossil fuel industry will bounce back as it always has, and bargain basement oil prices will slow the much-needed transition to green energy.

Who is right depends on a heady mix of geopolitics, profit, investor sentiment, government bailouts and net zero emissions targets, campaigner pressures and, not least, consumer behaviour – is virtual working, for instance, the new normal?

What is beyond doubt is the carnage in the sector. The lowest oil prices for almost two decades, with worse potentially on the way. Some oil major stock market valuations halved since January. At least two-thirds of annual investment – $130bn – dumped and tens of thousands of job losses. In a few markets prices have gone negative – sellers will pay you to take the oil, as global storage capacity fills.

“The price war and Covid-19 have really thrown the oil and gas sector into turmoil, and now we have companies really in survival mode,” said Valentina Kretzschmar, director of corporate research at analysts Wood Mackenzie.

Oil wells responsible for almost 1m barrels a day may have already been shut down because the price of oil is now lower than the cost of shipping it, according to US banking giant Goldman Sachs, with the number of wells growing “by the hour”. This is likely to “permanently alter the energy industry and its geopolitics” and “shift the debate around climate change”, said Jeffrey Currie, head of commodities at the bank.

Financial Times:

US oil prices crashed below $5 a barrel on Monday, hitting the lowest level since the contract launched in 1983, as the collapse in demand triggered by the coronavirus pandemic leaves the world awash with crude that it is struggling to store. West Texas Intermediate, the US marker, lost 74 per cent on Monday, sinking to a low of $4.04 a barrel, on warnings that storage could fill up within weeks — including at the benchmark’s delivery hub of Cushing, Oklahoma.

Lockdowns imposed in many of the world’s major economies have sent crude demand tumbling by as much as a third, leaving the industry facing what Jefferies analyst Jason Gammel called perhaps “the bleakest oil macro outlook” he had ever seen.

2 Responses to “Could Corona Herald Peak Carbon?”

  1. doldrom Says:

    Spoken too soon.

    “May WTI just traded below zero for the first time ever (trading below NEGATIVE $40 per barrel)… There was a small bid right into the settlement at 1430ET leaving the May contract to settle at negative $37.63.”

    “May is down over 300% today.”

  2. J4Zonian Says:

    I recently tried to watch The Big Easy for the first time since it came out in 1986, remembering it vaguely as a playfully sexy noirish film about New Orleans cops. I was shocked at the repeated instances of unsexy manipulative coercion and blatant patriarchal dismissing of women’s reality. It played the Doris Day-era game of minimizing and laughing off the pressure and dismissiveness, and completely ignored what would have been the real-world results—worse abuse, oppression, rape, discrimination of all kinds…

    If it were being honest it would reveal even worse racism and religious, political, and other isms.

    I expect this from movies from the 60s and before; finding it so open and knowing it never went away, that 60 years of activism have led only to ever-worsening conditions

    Both halves of the corporate duopoly are getting more brazen all the time, from shutting down 180 of 185 polling stations in one city in the midst of a serious need for space between people to proceeding with undeniably corrupted elections to intentionally create a contest between a right wing extremist with a mental illness and a right wing extremist with dementia….… just to make sure a social democratic had no chance. The Democrats have virtually guaranteed losing the White House and Senate on purpose so Sanders wouldn’t win.
    What a perfect summary of the state of Western civilization.

    http://www.nakedcapitalism.com/2020/04/demexit-now-how-the-democratic-party-cheated-bernie-sanders-out-of-the-nomination.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

    View at Medium.com


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