Have we reached 'peak oil'?
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The U.S. oil and gas industry faces a daunting recovery from the pandemic, said Paul Takahashi at the Houston Chronicle. "About 107,000 oil, gas, and petrochemical workers have been laid off between March and August," a staggering total even for an industry that is accustomed to soaring heights and crushing lows. But analysts say this oil bust is different even from those in the past. "Growing concerns about climate change" are expected to keep reducing demand for fossil fuels, meaning those jobs lost now might not return after this downturn. Even if crude prices "claw their way back to $45 per barrel" by the end of 2021 — up from around the $40 price mark where they have remained for months — an estimated 70 percent of the jobs lost may disappear permanently. A drop to $35 per barrel, and the industry is looking at 100,000 jobs gone for good.
The collapse in oil prices hasn't just hurt the drilling states, said Alexander Osipovitch and Ryan Dezember at The Wall Street Journal. "Wisconsin doesn't produce a drop of oil or gas, but there has been a bust there too," because of its supportive ecosystem for fracking. Wisconsin, along with northern states like Minnesota, Iowa, and Illinois, employs thousands of workers in open-pit salt mines that ship "pebbly grains ideal for hydraulic fracking" by the trainload to drilling fields in Texas, Appalachia, and North Dakota. Now the "local governments that envisioned the mines bringing long-term prosperity are looking at budget crunches."
All the places that rely on fracking face another threat, said the Journal in an editorial: Democrats who want to shut down the industry. "Hydraulic fracturing combined with horizontal drilling has unleashed a gusher of natural gas production in the Midwest and Southwest." Joe Biden and Sen. Kamala Harris now say they don't plan to ban fracking, but there is no way to reconcile that with their goal of making the U.S. carbon-neutral by 2035. In reality, natural gas fracking has let utilities shift away from coal, and has "done more to reduce CO2 emissions over the last decade than government regulation and renewable subsidies." The U.S. has eased "economically destructive climate regulation," and still, thanks to fracking, last year the U.S. led the world in carbon reductions.
Demand for energy is starting to tick back up, just not the way it used to, said Jeffrey Blair at Bloomberg. Oil refineries have relied on "long-standing patterns of consumption" of gasoline, diesel, and jet fuel. But while "thousands of airliners lie mothballed," gasoline consumption is rising quickly to pre-pandemic levels as "millions of drivers forgo mass transit to get in their cars." Refineries still aren't celebrating, though. Their ability to produce enough gasoline is constrained without buyers for pricier diesel and jet fuel. It's just not going to be easy from here on out for Big Oil, said Julian Lee also at Bloomberg. The pandemic has "accelerated" trends that have been building for years as more countries shift away from fossil-fuel dependence. OPEC finally admitted last week that "peak oil" could arrive by 2040. For some rich nations, it may already be here. Those companies that can't adapt "will go the way of the T. rex."
This article was first published in the latest issue of The Week magazine. If you want to read more like it, you can try six risk-free issues of the magazine here.