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Summary
- The year 2020 was a breakthrough year for growth of the renewable energy sector.
- Net oil exporting countries are hit hard by the 2020-21 green revolution.
- Lower crude oil prices may be a positive sign for the green revolution.
Copyright © 2021 Kalkine Media Pty Ltd
Despite the economic slump of 2020, the use of renewable energy has increased substantially in the past year. A rebound in the solar power sector in the US, China, and India during the second half of 2020, fast-tracking of ban on petrol- and diesel-powered cars in the UK from 2030 and the global battery boom are some of the factors painting a bright picture of green energy's future.
The green energy bandwagon continues to pick up steam in 2021 and is on track to gain further momentum in future.
Most of the countries around the globe have joined forces to combat the increasing pollution levels. US President Joe Biden decided to re-join the Paris Agreement on the first day of taking charge. China has agreed to cut production from seven steel industries in Tangshan as part of the country's commitment to becoming carbon neutral by 2060.
Impact of Green Revolution on Oil Exporters
The green movement has affected the revenues of various crude oil-dependent economies. Algeria, Iraq, Nigeria, Angola, Gabon and Kazakhstan are some of the countries facing the headwinds of the green revolution.
Copyright © 2021 Kalkine Media Pty Ltd
Numerous countries have failed to diversify their revenue sources and are still dependent on oil exports. The uncertain oil price forecast by EIA for 2050, peg the prices to fall in the range of US$48 to US$173 a barrel, adding pressure on the sustainability of these oil-exporting countries.
However, the transition from crude to green is not limited to these countries; it may spark the fire among prospecting energy superpowers too. The collapse of the US's shale boom and China's dominance in renewables may be the factors deciding the race's winner.
Effect of oil prices on the Green movement:
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The pandemic poured cold water on the oil industry with various companies struggling during the infamous 2020 crude oil crisis. The prices had collapsed to negative territories for the first time in the history of the O&G industry. A near-zero demand for crude oil had torn the balance sheets of various O&G heavyweights. However, the decision by OPEC and its allies to curb production and stabilise the oil market worked in favour of the oil producers. The oil-producing companies saw a silver lining in the second half of 2020 when oil prices started to bounce back.
Good Read: Is oil's bull run here to stay?
However, the struggle is not over yet. A new wave of green revolution seems to be dousing the hopes of the oil companies. President Biden signed an executive order in January 2021 to hold all new oil and gas leases to address climate change. In addition to that, he also banned the controversial Keystone XL pipeline.
Addintg to the oil firms’ woes, factors like stringent anti-pollution policies, efficient engines, restricted travels, and robust growth in electric vehicles are reducing the use of crude oil. As per the EIA data, the oil demand will reduce by 5.6Mbpd by 2026. Amid lower oil demand, it is hardly surprising that upstream investments will be scaled back.
However, for the supporters of green energy, the lower prices of crude oil could be a good sign because higher oil prices will encourage the oil firms to place higher bets on oil exploration and production.
