Another view:

The Oil & Gas Sector Could Already Be In Terminal Decline

https://oilprice.com/Energy/Crude-Oil/The-Oil-Gas-Sector-Could-Already-Be-In-Terminal-Decline.html?utm_source=browser&utm_medium=push_notification&utm_campaign=vwo_notification_1592431759&_p_c=1

The fossil fuel industry has faced serious headwinds for several years, but the rise of renewables combined with the fall in consumption as a consequence of the global corona crisis is pushing it over the edge and into “terminal decline”. Although global coal consumption continues to grow slowly, its use has peaked in developed regions. According to the 2019 BP Statistical Review of World Energy, U.S. coal consumption fell by more than 40% in the past decade, while in the EU it has seen a nearly 27% drop.

The primary culprits behind coal’s decline are competition from cheap natural gas brought on by the shale gas boom in the U.S., as well as a surge of renewable capacity aided by legislation aimed at curbing carbon dioxide emissions.

Victims of Their Own Success

But the natural gas and subsequent oil boom were victims of their own success. Even though demand growth for both of these commodities has been robust over the past decade, prices have plunged. So while it’s unsurprising that the coal industry has suffered immense financial stress over the past decade, the same is true of the oil and gas industry. Despite strong demand growth for its products, the prices of oil and natural gas have fallen by more than 50% in recent years. 

The fossil fuel industry has faced an oversupply problem, as well as a public relations problem. Even before the COVID-19 pandemic, the industry was already seen by many as one on its way out, and therefore it struggled to attract investors. Nevertheless, it seemed likely that the industry would enjoy at least another decade of dominance before renewables and electric vehicles combined to put the industry into permanent decline.

COVID-19 Rapidly Changed the Outlook

But COVID-19 has caused a significant change in the industry outlook. In the early stages of the pandemic, China’s economy slowed as the country grappled to contain the virus. This slowdown had a negative impact on fossil fuel demand. As oil demand began to soften, OPEC tried to work with Russia to reduce production. Talks failed, a subsequent price war broke out between Saudi Arabia and Russia, and oil prices collapsed.    Related: India Looks To Double Oil Refining Capacity By 2030

As COVID-19 spread to other countries and quarantines were implemented, oil prices ultimately fell into negative territory, which had never happened before with a major benchmark. Power demand fell as businesses closed and people stopped travelling or commuting. This created a perfect storm that obliterated fossil fuel demand in April. Global oil demand fell by as much as 30 million BPD, followed by gas and coal demand. Even demand for liquefied natural gas (LNG), which has seen strong growth in recent years, plummeted, and cargos destined for Asia had to be rerouted to Europe, adding to a supply glut there. 

Meanwhile, renewables may see a small negative impact from the pandemic in the short term – but the move toward green energy may gain momentum as the COVID-19 threat fades. Underlying demand for clean energy is rising.  Further, the investment climate for fossil fuels will continue to worsen over time, so the industry may find itself struggling to attract new capital even after the crisis.