*** depletion of oil resources
For more than a decade, the main concern in the oil market has been the depletion of oil resources, but reaching the peak of demand and then entering the downward path of this most important commodity market in the world has been an issue that has occupied the minds of analysts.
The reason for this development is, on the one hand, the discovery of new resources around the world that have pushed supply into equilibrium with demand over time, and, on the other, the risk of global warming, which encourages governments to support renewable fuels and regulate the use of renewable fuels. It has forced fossil resources and greenhouse gas emissions.
*** The effect of Covid-19 on global warming
But what has accelerated such a process is a virus. Coveid-19 has strengthened the belief of environmental groups that they must protect the people of the world as soon as possible, by sweeping almost every country in the world, infecting millions and killing hundreds of thousands on the one hand, and impacting global markets on the other. Basic measures have been taken to reduce greenhouse gas emissions, otherwise the land will be in an irreversible state, which will negatively affect the oil and gas industry more than any other industry.
According to Alex Kimani, a financial writer at Oil Price, there have been many periods of boom and bust in the fossil fuel sector, and each time prices have plummeted, oil and gas companies believe in relying on the valuable resources of these underground fuels. Have not lost. But this time it is different. Demand is still likely to be more than 10 million barrels per day lower than before the corona outbreak, despite entering an uptrend.
On the other hand, the voice of environmental activists has become louder for greater awareness of the dangers of global warming and moral investment. Thus, oil managers are accepting the fact that a significant portion of their assets (underground reserves) are likely to become obsolete and completely worthless at some point. If we accept this assumption, the attractiveness of oil and gas exploration activities will also be diminished, because a material will be discovered that may not have time to be purchased.
*** Beep transformation
British oil giant BJP has doubled its drilling rights following the historic 2015 UN climate change deal. However, the same company has recently acknowledged: “Concerns about carbon emissions and climate change mean that it is increasingly unlikely that the world’s oil resources will run out.” In fact, some of these resources will remain unused. BP has said it has reduced the value of its assets by $ 17.5 billion and said it expects the Corona pandemic to accelerate the process of distancing itself from fossil fuels. That is why the company and some European oil giants are trying to change from oil and gas companies to energy companies. In this way, they will be able to enjoy the benefits of a renewable fuel boom in the future.
BP owns several high-risk projects; From deep-sea exploration in Brazil, Angola and the Gulf of Mexico to Sunrise Reserves, jointly owned by the Canadian company Husky Energy, which requires an estimated 3.7 billion barrels of bitumen resources, requires a complex extraction process. . Unlike BPP, its US counterpart, ExxonMobil, is on the other side of the spectrum and has so far resisted the devaluation of assets, insisting that the value of oil and gas will eventually be restored.
*** ۲۰۲۵; Year of invasion of fossil industries
The goal of the Paris Environmental Agreement is to prevent global warming of more than 2 degrees Celsius by the end of this century so that catastrophic and irreversible events do not occur for the planet. But the alarming news is that by 2100, temperatures will average 3.2 degrees warmer, according to new research. Assuming this estimate is correct, the world community has only 10 years to dramatically curb greenhouse gas emissions, otherwise man will have to face the consequences of his irrationality forever. The Paris Agreement in 2016 and last year’s UN Summit (COP25) in Madrid failed to have a significant impact on global warming.
Under these circumstances, companies like Exxon, which are still reluctant to accept and announce the devaluation of their assets, have relied heavily on government support. These companies continue to operate on the assumption that governments will not take any drastic action against their indifference. However, this way of thinking may be dreamy. In January of this year, Andrew Grant, chief carbon analyst at Turkker, warned that the new environmental regulations were likely to be strong, sudden and not very regular. He said the reaction to the policy changes is likely to be seen by 2025, which will have a serious negative impact on the fossil fuel industry.
*** Which companies are most at risk?
Grant’s warning seems to be proving valid over time, as oil and gas companies are expected to devalue about $ 300 billion in assets this year alone, and if governments start to tighten their environmental targets, A trillion dollars (a trillion dollars) will suffer the same fate in the next few years.
Many eyes will be on the next UN Climate Summit (COP26) to be held in Glasgow. Environmental activists hope that this conference will be much more successful than previous sessions.
With such a vision in mind, companies such as BP, Royal Dutch Shell, Hess and Occidental Petroleum have so far devalued their assets.They will have more security in the long run than Exxon and the like, who have stubbornly relied on assets that are not potentially valuable. Even a company like OXY, which has long suffered from declining profitability, has recently seen its stocks rise by a Wall Street bank, JPMU, due to risk reduction policies as well as oil price stability.
*** Impact of the next US election
However, it might be hoped that Exxon would be wiser, as the company recently decided to lower the value of the massive Lake Curl mine north of Fort McCurry and launch its $ 30 billion annual global portfolio restructuring program. Add to Exxon’s debt, set aside.
On the other hand, if Trump is re-elected president, the American oil giants will not face much risk in the medium term. But if Trump’s possible rival, Joe Biden of the Democratic Party, wins the November election with his $ 5 trillion plan to combat global warming, it will be a difficult time for the oil industry to move forward. Trump has consistently repealed the environmental regulations of the Obama presidency. He recently lifted the federal government’s regulatory and repair requirements for methane spills in oil and gas projects. Also, in Trump’s latest anti-environmental action, for the first time in history, he has issued the right to dig in the Arctic National Wildlife Refuge, which covers an area of more than 7.6 million hectares.
*** OPEC challenges
The events of 2020 have also worried some former and current OPEC officials. “The corona pandemic and the fall in oil consumption have left OPEC members wondering if these events will cause a permanent change in demand, and what if the oil age is coming to an end,” Reuters reported in a report released late last month. Adopted a strategy for supply management.
A source close to OPEC told Reuters: “These people (in OPEC) are facing a new reality when they wake up and are trying to understand it better.” The source also said that in the minds of all key players, it is possible that oil consumption may never be fully recovered.
Reuters interviewed seven current and former OPEC officials who said that this year’s crisis, which pushed Brent oil below $ 16 a barrel, had prompted OPEC and 13 members to think more about the prospect of growing demand. Only 12 years ago, OPEC members made a lot of money with the unprecedented rise in oil prices to $ 145 a barrel. Demand had risen sharply at the time. But now, if consumption starts to decline steadily, the group will face dramatic adjustment. OPEC will need to manage its relations more closely with other producers, such as Russia, as it must maximize its declining revenues, while also competing for market share.
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