After two years of the highest and lowest petroleum prices in a decade highlighted flaws in the fossil fuel supply chain, major energy corporations are speeding up their shift to renewable energy, according to Capital.com.
Although the majority of the shocks to the energy markets were brief, the most recent period of uncertainty prompted the sector to press through with transition preparations already in place.
Demand for fossil fuels is projected to decline faster than expected as public attention and investment shifts to renewables.
In the last two years, BP, Eni, and Royal Dutch Shell have all taken attempts to get ahead of the market.
According to a McKinsey research, worldwide energy consumption will fall by 7% in 2020. West Texas Intermediate (WTI) crude oil traded as low as $11 a barrel, the lowest price in more than 20 years. Natural gas prices fell to their lowest level since 1998, with Henry Hub prices falling to $1.33/million British thermal units (MMBtu) in 2020.
This was followed by a year of loss recovery as energy demand increased and WTI crude oil hit $85 a barrel, its highest level since 2014. Gas prices rose significantly as well, hitting $6.70/MMBtu in 2021, the highest level since 2008.
According to McKinsey, not all commodities will follow the same road to recovery. Demand for coal may take longer, if at all, to return to pre-pandemic levels, but the business expects the recovery phase will be brief for most.
The income streams of oil and gas businesses followed a similar pattern. After a year of deficits, BP, Chevron, and Royal Dutch Shell all saw revenue turn positive in 2021.
The long-term consequences of the coronavirus epidemic have hastened the shift to alternate energy sources. Behavioral developments in the energy market during Covid-19 have led in fundamental adjustments that will have long-term consequences.
Governments extended stimulus packages to a variety of businesses in order to promote recovery. Following instability in the oil and gas markets and an emphasis on reaching net neutrality standards, most of this help in the energy sector is moving to renewable energy.
According to the International Energy Agency (IEA), governments would spend more than $17 trillion in stimulus measures in 2021 to offset the consequences of Covid-19. Renewables received £45 billion, or roughly 9% of the total, with the European Union receiving the lion’s share.
According to Ernst and Young (EY), this change has intensified since the pandemic since these initiatives lower emissions while providing employment, therefore promoting economic development. The renewables business has the potential to attract large private investment.
World Economic Forum’s research shows this shift is the consequence of legislation currently in place, continuing innovation, and renewables being the preferred option of investors.