This week, Aldo Flores, former deputy secretary of energy for hydrocarbons at Mexico’s ministry of energy, and Marianne Kah, former chief economist for ConocoPhillips, organized an event to discuss the oil markets and the future of energy. Incase you’re unaware of the current oil prices, it has decreased to below $0. Before today I didn’t even know a number like that was possible in the market. This number didn’t appear out of thin air though, this decline started towards the beginning of this year due to the pandemic.
This is no cause for alarm yet; no one needs to stock up on oil like some are with toilet paper. The oil markets have a vast history of “boosts and busts” as Aldo Flores said. He also stated that the market “is well acquainted with versatility of moments in crisis and successes”. As you could probably guess, the price of oil normally increases in times of conflict and decreases in times of peace. In the meeting they discussed how the prices have been difficult to stabilize since 2014 due to a large abundance of oil in Texas. All these factors contribute to the current price we have now, and the pandemic is what tipped it over the edge into the negatives. Aldo Flores illustrated in his PowerPoint his plan to address the situation at hand. For the physical and financial market, he believes we need to bring down the production of oil, and if we have too much, then we should build strategic reserves of it. For demand, he stated that in order to have economic stimulus we must have policy transparency. There must be set clear rules on how to engage in trading and allow investors and liquidity into the market. After Aldo Flores spoke, Marianna Kah took the metaphorical stage and discussed some possible futures with us.
Marianna Kah lead the conversation with her PowerPoint detailing multiple statistics from IEA and OPEC, each with a set of predictions for the future. As of now, most of our energy comes from fossil fuels with a low percentage coming from renewable energy. Most of the possible futures claim that our fossil fuel consumption will mostly stay the same, but renewable energy will increase from 2% to 5-7% by 2040. The only future that is drastically different from these is one where the earth stays below 2 degrees Celsius. In this statistic renewable energy will take up most of our energy while fossil fuels only consume a small portion of it. Furthermore, Marianna Kah went on to discuss what the future may look like for everyday people.
The industries that will take the biggest blows are the transportation companies. Ride sharing apps and airlines are already losing thousands upon thousands of dollars a day and the end is nowhere near. Many people believe that the world we lived in before will never completely come back. Pleasure travel will be greatly reduced, and visas will become harder to attain. The need for oil may never come back because people are learning how to adapt to life in less complex ways. 3D printing will increase and other industries that require less social interaction will boom. Countries will want things produced at home for the very same reason. If this does happen, the U.S. and Canada will bear the brunt of this because they are inland. Unlike European or Asian countries, the U.S. and Canada have a limited number of people to trade with by their boarders.
In contrast, Marianna Kah also stated that the need for oil could easily spike because most people are buying in bulk now which will lead to a greater production of goods. Greater production leads to more transportation which results in more gasoline and jet fuel used. Ultimately, no one can predict the future, and it’s best not to try. All anyone can do now is look out for each other and do our best in the strange, new times we live in. Stay healthy everyone!