Right now, the whole world has taken a pause. And in a world without movement, fuel becomes obsolete. However, despite a dramatic plunge in oil demand, companies are still pumping out oil.
The result — oil prices went negative for the first time in history and some of the biggest oil companies are in trouble.
Overproduction is at the heart of the problem. And even though oil production is decreasing, it’s not decreasing nearly enough. While oil demand continues to stay low, not hitting the brakes means oil storage in the U.S. could hit its limit by mid-May, experts say — and this possibility has a variety of implications for the environment.
1. Crude oil volatility encourages utility companies to shift more to renewables
While oil demand dropped, renewable energy is actually experiencing an upswing. This year, renewable energy sources made up 21% of electricity in the U.S. for the first time in history. The New York Times reported that although some projects have been delayed due to the pandemic, wind and solar will continue to grow. This will happen even as oil, gas, and coal struggle to financially recover.
Analysts at Raymond James & Associates also told The Times that a reduction in electricity use could actually help renewable energy companies. Since operations for wind and solar farms are significantly less expensive than fossil fuel plants, more utility companies are turning to renewable energy instead.
With solar and wind power becoming increasingly more affordable, there may be some added momentum to the shift to renewables.
2. Dramatic decline in oil demand lead to clearer, less polluted skies
Newly empty highways and skies could cause a 5.5% decrease in carbon dioxide emissions this year, the largest annual drop in emissions ever recorded.
Across the world, pollution has significantly decreased, leading many to believe COVID-19 was an opportunity for the Earth to “heal”. Photos of pristine canals, smog-free skies, and reappearing wildlife have flooded social media as a result.
Here are just some examples: The Himalayas are finally visible after decades of pollution have left them hidden. In New Delhi, India—one of the most polluted cities in the world—saw a 60% reduction in fine particulate matter. Even in the usually smog-covered city of Los Angeles, residents experienced some of the cleanest air in any major city across the globe last week.
The list goes on. But even as clear skies emerge, the oil demand shock still indicates some dark days ahead.
3. Abandoned oil wells could cause toxic gas leaks
As continual production accentuates the concern of there being too much oil to store in existing wells, we could soon see a mass abandonment of oil wells. Left unattended, these wells could lead to greenhouse gases like methane leaking out.
Lorne Stockman, senior analyst at Oil Change International, told Mother Jones this would be an “environmental nightmare in the making.”
The impact this drop in oil demand has on our environment post-crisis
So how does oil demand impact where we stand on sustainability post-crisis? There are a number of perspectives.
On one hand, some believe it could be a major turnaround point in the fight against climate change and the beginning of the end for big oil. (For instance, a huge shift to renewables, oil prices stay low, and so on.) Others aren’t so bullish about the demise of big oil. After all, the fossil fuel industry may climb back just as it has in any other crisis. And in terms of the environment, some scientists believe this peak in air quality improvements will be short-lived unless we continue taking serious preventive measures after the crisis.
Dieter Helm, Professor of Energy Policy at the University of Oxford, told The Guardian that a loss for oil doesn’t necessarily indicate a big win for the climate.
“If anything, it may hold up the share of oil for longer, because it’s cheaper. It could be bad news from a climate point of view,” Helm said.