The deadly combination of the pandemic disrupting the planet and a supply glut generated this unprecedented crisis for the industry.
As COVID-19 case numbers surge across the globe like a hot knife through butter, news of a potential vaccine has people clinging to hope that there is light at the end of the tunnel. The hope is the vaccine could all but end this pandemic that has claimed well over a million people. The deadly combination of the pandemic disrupting the planet and a supply glut generated this unprecedented crisis for the industry.
For the oil and gas industry, which has been ravaged by the pandemic, the vaccine news comes at an opportune time and could help the industry rebound, giving oil prices a small shot in the arm recently, with West Texas Intermediate at $45.25 and Brent Crude at $47.39.From depressed prices, thousands of job layoffs, and little demand for products with travel all but ground to a halt and fewer people commuting to work, the industry has had to withstand punch after punch. Waiting is the hardest part, and as the holiday season is around the corner, COVID’s second wave and resurgence, with newly announced lockdown measures, means the global outlook for oil could continue to suffer.
As Pfizer Inc. and Moderna announced news of their respective vaccines, both near 95% effectiveness, if the vaccines meet safety and effectiveness standards and approval by medicine regulators, a vaccine could be delivered in the early stages of 2021. Though the vaccine is an encouraging sign, it is hard to predict how vaccines will allow for ‘normal’ life to return.
Oil prices and markets are sure to take this news in stride and express a cautious optimism and look towards a post-COVID world where their products once again are in demand. A vaccine is a potential game-changer in that it will speed up the demand recovery and drive the need for hydrocarbons. The outlook states moderate growth in crude oil and natural gas production will continue until its peak in 2040.
The report mentions energy use in 2020 will fall by 6% due to the pandemic, while crude oil production decreases by 7% or 335,000 barrels per day compared to 2019. Given its role in people’s lives and supporting energy for most of life’s activities, oil and gas will remain a viable and necessary industry for decades. Its next challenge will be creating value in life after COVID after millions of people have had to transition and adapt this year. Companies have had to figure ways to operate safely as the infection grows and spreads.
As the winter drilling season gets ready for January activity, the virus presents a threat for the workers, too, as the virus is strongest in unventilated areas – such as a camp – and the risk for more outbreaks. Another risk for the camps and workers to control the spread is how workers are flying in and out of province, to and from home. This is a situation where the vaccine could help and safely transport workers across the country. An industry known for its innovation, technology, and ability to adapt, O&G will need to tap into that innovation getting out of this pandemic and for the rest of the decade.
Like former downturns and price crashes, COVID has forced the hands of companies to change their strategies. Those who use the pandemic to reposition themselves and their business to transform their operations will come out on top. There is a lot that the industry can learn from this pandemic, and when the dust settles on COVID-19 and as the world recovers and bounces back, it will ultimately have a profound impact on the oil and gas industry. As the industry does its best to get through the end of this pandemic, the potential of a vaccine is a beacon of hope for an industry suffering through daunting and unprecedented times and would welcome a renewed demand for its products.