The coronavirus crisis is having a major global impact on every industry. Millions have been infected, and hundreds of thousands have lost their lives to the virus. As testing capacity has increased, confirmed cases have soared. Europe and the United States have been the worst affected, although other countries are now reporting a continuing rise in new infections.
The COVID-19 Business Energy effects
The energy industry has also been greatly impacted. Large oil companies such as Chevron, Royal Dutch Shell, Total and Eni have announced massive cuts in spending for the rest of the financial year. Reductions have been as much as 25%, with some exploration and production companies announcing even higher cost-cutting measures. For business customers who consume gas and electricity, this will provide a level of uncertainty on how it will affect their operations moving forwards. This makes it more important than ever for customers in the UK to compare business energy deals to ensure they are getting the best terms. Online comparison site, Utility Saving Expert makes it easier than ever to compare commercial energy suppliers and contract types to help customers get the best deal possible, even offering renewable options for those environmentally conscious.
In the UK, we are now in the second phase, as the government looks for ways to safely reopen the economy to limit further financial damage. The first phase included containment measures to limit the spread and prevent the NHS from being overwhelmed. The second round will be driven by the economic crisis that the coronavirus pandemic has created. The third phase will look at the long-term effects that have come from collective decisions made by governments, policymakers and businesses across the world.
We can’t confidently say what these long-term consequences will be, as the situation is unprecedented and constantly evolving. However, a few outcomes are likely possible.
As China emerges from the peak and looks to have control on the situation, demand is starting to recover there. Traffic has increased in major cities such as Beijing. Elsewhere in the world, lockdown restrictions have started to be eased and some activities such as opening up of businesses and schools have started to take place throughout Europe.
Plummeting demand for fuel turned oil prices negative as producers faced problems with storing crude oil and other refined products. The travel industry will take a lot longer to return to previous passenger levels as airlines have grounded their fleet.
Electricity demand has not suffered the same consequence, but is still significant. Electricity usage has dropped by an average of 15% for companies that have implemented lockdown restrictions, according to the International Energy Agency (IEA). As more and more people stay at home, domestic usage has increased but this isn’t enough to offset business consumption as factories, plants and other businesses have been shut down. Demand for renewable energy sources has been more robust in comparison to traditional fuel sources such as coal and oil.
Worldwide energy investment is estimated to decrease by around $400bn as a result of COVID-19. Although, this will hopefully be combatted as governments outline their own plans to reopen economies.
It has been extremely difficult for economists to convey the scale of this pandemic as measures are implemented across the globe to reduce the number of infections and deaths. Meanwhile, central banks around the world have cut interest rates. Canada and the United Kingdom have also put together financial packages to support employers and employees through this difficult time.
Most of the long-term effects as a result of the virus still remain unknown. Although, there are still some predicable consequences. According to Robert Morris, principal analyst at Wood Mackenzie, reduced investment in oil and gas companies will have a direct impact on production in the near future. Previously expected projects that were awaiting final confirmation would have provided production of an additional 1.8 million oil barrels per day, and around 20 billion cubic feet of gas production per day within five years’ time. 90% of production will now either be delayed or completely cancelled.
Renewable Energy Impact
The impact on renewable energy isn’t as clear. Although a reduction in the demand for oil could further increase investment in sustainable energy generation. Many companies will look to diversify their portfolio and invest in cleaner energy to remain viable in the long term. Unfortunately, in the short-term, renewable energy will have to address its own challenges. Many businesses will have reduced capital and won’t be able to invest as much as they would like to on solar, hydro and wind initiatives. Electric cars, bikes and e-scooters are becoming more popular as the world looks to sustainable alternatives to oil and fossil fuels.
To summarise, we will only really begin to understand the full effects after a certain period of time has passed. Some things are inevitable, whilst others require careful monitoring to see how they will affect society and the economy as a whole. It is important to remain optimistic as infection rates are decreasing and many people are slowly returning to work.