By Glada Lahn and Siân Bradley, Senior Research Fellows, Energy, Environment and Resources Programme
This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.
For oil and gas exporters, COVID-19 has caused a downturn like no other. From early 2020, lockdowns sent global energy demand plummeting by over a quarter. Combined with the Saudi-Russia price war, oil prices hit their lowest levels in over two decades, down to less than $20 a barrel in April. Without strategic reserve filling, the collapse would have been even steeper. As lockdowns eased and June’s OPEC-plus agreement to cut production boosted oil prices (around $40/b in June), producer countries could be forgiven for hoping that the worst is over. However, as the pandemic hit, the fossil fuel market was already facing a grim prognosis.
From boom and bust to… bust
Five years ago, Chatham House began exploring what decarbonisation might mean for extractives-led development. To achieve the Paris Agreement’s commitment to limiting global warming to well below 2°C and as close as possible to 1.5°C, all credible pathways will require a radical reduction in fossil fuel use. With 76 per cent of all greenhouse gas emissions (GHGs) and close to 90% of CO2 emissions coming from the burning of coal, oil and gas, the implications for these markets are profound. We are no longer talking about a cycle of boom and bust, but about structural decline. Continue reading