Let’s Counter the Claims of Oil’s Demise

Mark Green
Posted May 8, 2020

Some anti-industry voices – apparently not regular readers of this blog – probably missed Monday’s post discussing the strong link between the economy and energy from natural gas and oil.

Not surprisingly, these are the folks arguing that the current coronavirus-associated market downturn surely means the end is near for U.S. oil. Some have cheered the challenges industry faces, with one tweeting that natural gas and oil jobs (good-paying ones, I’ll add) belong in history’s rubbish bin, comparing them to two of the most odious occupations of the past. Well, no one’s going to confuse social media with a friendly game of bean bag, right?

The trouble with these arguments is they’re grounded purely in ideology and neglect that economic, energy, human progress and development go hand-in-hand.

As noted in the earlier post, data and history indicate that while the U.S. natural gas and oil industry is working through significant COVID-19 challenges right now – along with a number of other business and industrial sectors – it is poised to power economic recovery as personal driving and commercial traffic increase (fuels), as businesses reopen (electricity) and as manufacturers ramp up operations (power/feedstocks).

In fact, oil demand is showing hopeful signs as the economy gradually reopens. The latest weekly data from the U.S. Energy Information Administration (EIA) show U.S. petroleum demand, as measured by total domestic petroleum deliveries, was 15.4 million barrels per day (mb/d) as of May 1, which was an increase of 1.6 mb/d since a low of 13.8 mb/d the week ending April 10. With 31 states starting to reopen, demand likely will get a boost.

This shift towards recovery is likely not just for the United States, but globally as central banks have injected some $8 trillion dollars of stimulus so far, with potentially more to come. Additionally, China’s real GDP growth by Bloomberg consensus expectations could rebound to 8.0% year over year in 2021 from 2.0% this year. So, China alone could contribute an additional 0.8% to 2021 global real GDP growth of 4% – or about one-fifth of a global recovery by consensus estimates.

Natural gas and oil are the world’s leading energy sources for good reasons. They’re energy rich, significantly more than other sources. They’re portable and adaptable. They’re reliable and available the world over. And their current low prices are helping household bottom lines and making them even more competitive in the energy mix.

Indeed, in a recent tweet, Jason Bordoff, part of the Obama White House team and now director of Columbia University’s Center on Global Energy Policy, noted the breadth of natural gas and oil in modern economies – even taking into account the significant oil demand decline we've seen, associated with the pandemic:

“This is the most extreme demand-side response anyone could imagine. … [H]ere we have 4B [billion] people on lockdown and oil demand is only down 30%.”

The International Energy Agency noted in a recent report that amid the slowing of global economies as governments tried to limit the spread of COVID-19, “There was little change in the share of oil and natural gas …”  

And there’s this from Axios’ Amy Harder, who covers energy for the news website:

The reports of the death of the oil industry are, to quote Mark Twain, greatly exaggerated. … Progressive leaders are pouncing on the current collapse in the oil sector as a sign this is the beginning of its end and a turning point for the climate-change movement. Not so fast. … Yes, the coronavirus is throwing the industry into its worst crisis ever, and thousands of workers and possibly hundreds of companies could go bankrupt in the coming months and years. But no, our society’s structural foundations that run on oil have not changed — and that will become clear in the long term, after the crisis is over.

Indeed, as Harder points out, this was proved true after the 2008-2009 financial crisis. The natural gas and oil industry came back with gusto, launching the U.S. shale energy revolution that made the U.S. the world’s leading natural gas and oil producer.

U.S. global leadership in natural gas and oil – the leading fuels of modern economies now and for decades to come – will continue to be a strength of our country as it recovers from the pandemic. The women and men of our industry will be there to provide affordable, reliable energy for consumers, businesses and other industries when the world gets back to work.