The Oil Patch – How COVID-19 Has Affected the Petroleum Industry
The impacts of COVID-19 are extensive and substantial, impacting industries ranging from the educational services industry to the hospitality industry. Therefore, it is no surprise that one of the most impacted industries during COVID-19 would be the petroleum industry. COVID-19 has helped transform the petroleum industry from the centre of economic cycles to a long-term declining market and overall industry.
According to a joint report emancipated by the Labour Market Information Council alongside the PetroLMI Division of Energy Safety, before the pandemic, from 2014 to 2021, the employment rates in the petroleum industry had already fallen by 23% between August 2014 and February 2020. During COVID-19, employment rates were down 11.7% throughout all sectors of the industry. Nevertheless, during COVID-19, the numbers only went down furthermore – one of the primary reasons being the unsuccessful agreement to support oil prices by limiting production during COVID-19 by Russia and Saudi Arabia, which ultimately translated to fewer jobs in the petroleum industry.
Image showing the employment rates in different sub-sectors from 2012 to 2020. https://www.dailyoilbulletin.com/article/2020/7/31/covid-19-takes-toll-on-canadas-oil-and-gas-industr/
COVID-19 has decreased employment rates throughout the industry and slowed production and mobility worldwide, ultimately decreasing global oil demand. According to the International Energy Agency, oil demand was down 30% ever since April of 2020, which has not been seen since 1995. This produced a domino effect that forced producers to scramble for facilities to store crude oil, causing oil stocks to be at an all-time high in June of 2020. Nevertheless, the oil demand has started to increase as countries begin recovering from COVID-19 slowly.
U.S energy information administration short-term energy outlook. https://www.eia.gov/outlooks/steo/report/global_oil.php
On top of this, countries worldwide have been affected by this – mainly developing countries. The current fall in oil prices has limited countries to respond to pressure from COVID-19, slowing down progress even more. According to the IEA, smaller countries are now taking the lead in producing oil; it is estimated that crucial oil-producing countries, including Iraq, Nigeria, Saudi Arabia, and Angola, would likely see a drop in their net income for 2020 and 2021 of 50-80% compared to 2019.
As a final observation, the oil industry, alongside the world, is starting to recover from this pandemic. It is evident throughout the following year, although oil industries may still decline, their stock and production will still be available, used, and accustomed to throughout the next few years while electricity fuel is being developed. After COVID-19, it will be an age of opportunity for the petroleum industry because COVID will act as a catalyst to accelerate shifts in the petroleum industry’s ecosystem, providing future opportunities.
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