The world is facing a global threat like it was never seen before. To some extend, it is like being at war. It is hitting hard our health systems first and, as a consequence, our economies are forced to an almost stand still. It started east just few months ago and it’s going all around the globe without stopping at borders. We are all in a fight against a tiny enemy we can’t even see and no one can say when this will be over. We have to be prepared to resist for a long time, months for sure, and it will only end when the last virus is eradicated by the right vaccine. One side effect this Corona crises has caused is that it made the oil price plummet to record low levels. Today March 19, it is at around $ 25 per barrel, a price we had reached last time almost 20 years ago. And many are expecting the oil price to fall even lower, much lower, and maybe as low as $ 10 per barrel. At first sight some may think that these low oil prices will burst again the fossil fuel economy allowing low gas prices and "killing", once again, the trendy electric mobility and the clean energy sector.
Well, this might be a short-term risk indeed, but this latest oil price crash may well serve as a turning point for the clean energy transition. The extraction costs for new oil is generally well above the actual $ 25 quotation, meaning that to maintain reasonable profits the price needs to stabilize at around $ 55-60 per barrel. Unlike the very volatile price of oil, the price of installing regenerative energy sites harvesting the free power coming from wind and sun is predictable and stable. Once the equipment is installed the running costs are close to zero, even the price for battery farms necessary to store the excess energy and stabilize peak demand are continuously descending. For various reasons the price of oil will be increasingly volatile: wars, political instability, internal price fights among oil producing countries and possible unexpected and unpredictable pandemics means that banks will increasingly be more reluctant financing new oil projects. In the report of August 2019 "Wells, Wires, and Wheels..." BNP Paribas states that oil can remain competitive against clean energy produced from regenerative sources only if sold at prices between $ 10 and $ 20 per barrel. Such price can be achieved and sustained if oil is extracted from already existing production sites but at the same time it would not generate enough profits to finance the research for new oil. It looks like the oil business is come to a dead end, very soon today’s oil producing countries and multinationals will sit on stranded assets.
But there is a way to survive this upcoming energy tsunami: investing heavily in clean and sustainable energy projects. We need a global 10-years business plan which allows us to transition towards an emission free energy production. Among other things, a very recent study published by the Italian Society of Environmental Medicine and the Universities of Bari and Bologna , confirms that there is a correlation between the spread of the COVID-19 virus in North Italy and the high levels of smog, mainly caused by the fumes of internal combustion vehicles: the more the air was polluted the more the virus has accelerated its spread. Because of the lock down in Italy, the traffic level dropped significantly and the air quality has improved allowing people to breath clean air again. Nature has sent us a very strong signal and we must take it seriously: we must change now, we might not have a second chance. We must stop to search for new oil now and invest instead these resources in clean, emission free energy projects. We need to use our common sense and the desire to live a healthy and long life since we all breathe the same air and we all drink the same water. COVID-19 will change our society forever; it has shown us how fragile we are and has possibly achieved what Greta Thunberg dreamed of.
The stone age is not over for lack of stones... the same will happen with oil.