With the rapid spread of COVID-19 across the globe, the energy sector is suffering from the impending losses both in employment and revenue.
Unfortunately, the transition to a 100% clean future powered by renewable energy seems diminishing at this moment.
As such, the team at Norvergence LLC has assessed the impacts of coronavirus on the energy sector (both renewable and non-renewable).
Oil demand and prices
In June 2020, oil prices fell more than 2% (prices have been decreasing gradually from March), and simultaneously, US crude stockpiles hit an all-time high. The US Federal Reserve itself has admitted that it would take years to get fully recovered from this situation.
On the other hand, we have seen prices rise in different parts of the world based on recent positive economic forecasts but there is still an uncertainty factor prevailing.
This uncertainty is driven by the way that the monetary downturn has not been brought about by economic weakness but rather by outer variables: a pandemic and governments’ reaction to the pandemic, neither of which adjusts with past monetary downturns or recuperation endeavours. Those components make a modelling of the economic future incredibly complex and hazardous.
Liquefied natural gas
Due to the decline in economic and industrial activity triggered by COVID-19, the liquefied natural gas (LNG) sector is facing a lot of challenges.
Indeed, even before the pandemic, members in the LNG business were portraying 2019 as a tempestuous year. Starting in the winter of 2018/2019, the blend of over-supply of LNG (incompletely because of new supply from the US), more fragile interest in Asian markets, and hotter climate caused the start of a multi-month disintegration of conveyed LNG prices in worldwide markets.
While the pattern towards an over-supply and low-price condition is great for LNG purchasers, it makes huge obstacles for the LNG industry. Low (or negative) margins prevent interest in new undertakings by LNG providers and altogether compel the accessibility of sources of financing for new LNG ventures.
The team Norvergence believes that the energy sector is changing following the exceptional difficulties introduced by COVID-19. The shock experienced in the course of the last few months ought not to dominate the continuing development of the energy sector’s noticeable quality and prominence in the energy transition or change story.
There is a greater picture. Huge, however not seismic, operational and legally binding adjustments have and will be made inside the energy industry to guarantee its enduring development.