The importance that in the midst of the pandemic caused by COVID19 this decline is taking place in the already decaying oil industry and, at the same time, that peak in the demand for crude oil is being reached, which was predicted a few years ago. , raises the need to return to reality and put your feet on the ground.
It was said that the era of oil would not end because it was missing but because there would be an enormous technological change linked precisely to the concern about climate change. The Costa Rican ecologist and biologist Gabriel Rivas-Ducca, a member of CoecoCEIBA-Friends of the Earth International, talks about the change that is coming, much faster and more radical, and shares ideas of where we are going in this transition decade that is beginning.
For this Friday, May 1, Saudi Arabia, Russia and the rest of the Organization of Petroleum Exporting Countries (OPEC) will begin cutting their production by 23%, as agreed, which is calculated at 9.7 million barrels per year. day. However, it has been warned that it will not be enough as each week some 50 million barrels of crude are being stored and accumulated - enough to supply Germany, France, Italy, Spain and Great Britain together. That is why it is estimated that the world will run out of places to store oil on land by the end of May or the beginning of June.
One of the best indicators of how the industry is reacting is the sudden collapse in the number of wells operating. Before the coronavirus crisis, oil companies operated about 650 wells in the United States. By last Friday, more than 40% of them had stopped working, reported the Bloomberg agency.
One of the first effects of the coronavirus crisis in the industry was this drastic reduction in demand (between 20% and 30%) and a huge inability to store crude oil, says Rivas-Ducca. “Now, rather, the producers are paying to take that surplus. One can say to close the wells and reopen them when there is demand; but that is not so easy from a production and technological point of view, in addition to the fact that gas production is always associated with oil ”.
For this reason, it is expected that if there is no agreement between governments to produce less or much less oil, the high prices that existed before the crisis could not be maintained. “Therefore, the trend is for oil prices to fall due to the arrival of a peak in demand. We are going to see that prices will tend to decline in this decade ”, adds the activist of the Costa Rican social environmental movement.
A few weeks from reaching a "peak in demand"
Rivas-Ducca asserts that demand is actually reaching a peak, which will continue to decline from now on, he predicts.
“A long time ago, and this became famous, a Saudi Arabian oil minister said that the oil era was not going to end because there was a lack of oil, just as the stone age did not end because there were no stones, but it would be basically because there would be a huge technological change, linked precisely to concern about climate change, to the strong negative impact that all oil companies have received, ”he says.
In fact, the same giants of “commodities” (trading of raw materials) are already talking about the end of the game and believe that the peak of oil demand will be reached in mid-May because the marginal price of oil will no longer be determined by the agreements to reduce production or supply, but by demand, or rather, the lack of it.
Since the 1990s, the environmental movement has demanded governments and corporations to stop expanding the oil, gas and coal frontier, using public or private money; and it has demanded that it go towards a world of alternative energies.
“We consider as ecologists, that that moment has already arrived for various reasons. So this decade from 2020 to 2030, we see it as precisely that decade of transition, where there is going to be an effective reduction in demand ”, declares Rivas-Ducca.
Since the end of the last century and supported by studies of the oil industry itself, environmentalists have warned that a peak of conventional oil production had been reached. Since then the oil industries and governments have invested in unconventional sources of oil, due to the increasing scarcity of conventional oil reserves. We are talking about shale, synthetic crudes based on oil sands, coal-based liquid fuels, shale and “fracking” (hydraulic fracturing to extract gas and oil from the subsoil) among others.
“When it was said that conventional oil sources were already being depleted, we said as ecologists that, instead of investing in unconventional sources of fossil fuels, that money should be used in the transition. This was not done, of course, because there was no interest from the oil industry or the large military industrial complexes; but at some point it will have to happen ”, emphasizes the ecologist, who considers that soon the collapse of these unconventional oil sources will also be seen, since they are not profitable.
The next chapter in the oil crisis is already inevitable and the entire industry is forecast to close shortly; not because he wants to, but because he has no choice. In the United States, ConocoPhillips and Continental Resources have already announced closures. In North Dakota, production companies have already shut down more than 6,000 wells, reducing production by 405,000 barrels a day (30% of the state's total production), the Bloomberg agency reported. These closures are also occurring in Chad (Africa), Vietnam and Brazil.
One of the largest refineries in the United States, Marathon Petroleum, will stop production at a plant near San Francisco. Royal Dutch Shell has vacated several units at refineries in Alabama and Louisiana. Many refineries are operating at half capacity in Europe and Asia. US refineries processed just 12.4 million barrels per day last week, the lowest figure in 30 years, except when they have been closed by hurricanes.
Where are we going?
In the era of "DC" or "after coronavirus" as Rivas-Ducca calls it, he believes that change will be much faster and more radical than previously thought, because it has to do with world reality.
He foresees a transition towards a lower consumption of oil for the transport sector, although it will not all end, since plastics, fertilizers, asphalt, detergents are manufactured from this product.
“We are going towards a new reality, a decrease that is not only necessary in the sense of greenhouse gas emissions, but is inevitable due to the reality of this oil production; it gives us enormous possibilities ”, he emphasizes.
For Rivas-Ducca, there is a generation more aware of the enormous impact of oil production on climate change and a cultural and social trend towards other more public and collective forms of transportation.
In Costa Rica, much of the environmental movement does not encourage people to change their traditional car for an electric one, as they consider that the environmental cost of manufacturing this type of vehicle is also enormous. Likewise, they consider that ethanol or biodiesel are not options but euphemisms since they are manufactured from extensive and extractive crops of sugar cane and African palm
“They are absurd; It is a world upside down that, as social ecologists, we want to put it, so to speak, to the right ”, he said.
At this time when several countries are debating the measures of post-coronavirus economic reactivation, there are all kinds of reconsiderations, says Rivas-Ducca; But for him, as for many people and groups, the most important is “to ensure citizen control over water and food, that is, over seeds and over a production process that has to be above all agro-ecological and economic. social solidarity ”.
“I hope that in Costa Rica I also know about that, because the situation is absolutely absurd and dangerous: we import 53% of the rice we consume and 80% of the beans from China, Argentina and even Nicaragua. We bring blackberry or strawberry jams from France when blackberries and strawberries are grown here in the mountainous areas. What is the ecological cost not internalized in the price of greenhouse gas emissions from these imports? ”He questioned.
This important moment is a huge possibility for change. "From the environmental movement we have given contributions for many years on how an ecological society should be, sustainable, in dynamic balance, which undoubtedly also goes through a radical redistribution of wealth, through a way of life with much less environmental impact" Rivas-Ducca recalled.