“We’ve never had a better chance …
… to make a greener world. Covid-19 has delivered unusual environmental benefits: cleaner air, lower carbon emissions, a respite for wildlife. Now the big question is whether we can capitalize on this moment. “
Coronavirus has dealt the fossil-fuel industry the biggest single blow in its history, and it is clear that 2020’s plummeting demand for oil and gas is no mere flesh wound. The global Covid-19 crisis may have already triggered a terminal decline for big oil.
BP’s decision last week to reset its oil price forecasts for the next three decades was the latest tremor in a seismic shift for the industry. Its forecasts of a $75-a-barrel oil price over the next 30 years were scrapped in favour of an average price of $55. The watershed decision wiped more than $17bn from the value of its business at a stroke and could mean many of its untapped oil reserves will remain in the ground.
The transition to a renewable future featured prominently in BP’s statement. Chief executive Bernard Looney said: “These difficult decisions – rooted in our net-zero ambition and reaffirmed by the pandemic – will better enable us to compete through the energy transition.” The company added that the pandemic would probably “accelerate the pace of transition to a lower-carbon economy and energy system”.
It is a clear acknowledgement that the progress of the green transformation is unstoppable, only weeks after Royal Dutch Shell too bowed to the inevitable decline of oil industry returns. Shell revealed a dramatic rebasing of its shareholder dividends, wiping three-quarters from the annual payouts expected this year, in its first dividend cut since the second world war.
Ben van Beurden, Shell’s chief executive, said at the time that the pandemic could bring the high-water mark of the oil market closer and may mean that the company shows preference to clean energy projects “which serve us better in the future”.
Van Beurden has been more cautious than Looney, but they are heading to the same conclusion. The most ancient of human terrors – a pandemic – has shown two of the world’s most powerful polluters to be out of time.
Both companies acknowledge that the peak in global oil demand is likely to come sooner than expected as a result of the collapse in fossil-fuel use during the pandemic, with further momentum provided by governments that focus on a green economic recovery. One research firm, Rystad Energy, believes that more than 280 billion barrels of oil may be left in the ground as the world’s appetite for the fuel peaks in seven years’ time. Others believe the peak may have passed last year.
Nonetheless, a climate victory is not guaranteed. It will require governments to accelerate plans for a green economy, and that will be a test of voters’ political will. Politicians will be wary of testing public resolve for further change when economies around the world have received their worst battering since the second world war.
Some industries, such as aviation, appear to be decades away from the technological breakthroughs that would enable them to make a meaningful contribution to emissions cuts.
This will put further pressure on oil companies to acknowledge their fate and put more management focus, and money, into embracing renewables. BP set a carbon footprint target of net zero by 2050. But by putting just $500m of its annual $12bn investment budget into green energy, it showed that words were not being matched with deeds – a familiar accusation can be levelled at major polluters. This time, though, the existential threats to the planet (both Covid and climate) pose a terminal threat to the fossil fuel majors. BP and Shell are savvy enough to know this.
The admission by oil companies – the corporations with most to lose from a battle against the climate crisis – that their industry is on the cusp of decline renews hope that change is possible.
We’ve never had a better chance …… to make a greener world. Covid-19 has delivered unusual environmental benefits: cleaner air, lower carbon emissions, a respite for wildlife. Now the big question is whether we can capitalize on this moment. The Guardian aims to lead the debate from the front.