As tens of millions of Americans self-quarantine or heed orders to stay at home during the coronavirus pandemic, many wonder what effects the mini global economic recession initiated by the virus will have on energy use, both short-term and long-term.
Economic recessions do impact energy use, but according to the experts, it’s too early to tell just how deep this one will be. As some may recall, the 2008 financial implosion and the major recession that followed had a distinct negative impact on the oil and gas sector; the price of a barrel of crude oil went from about $150 to $35 in just a few months.
Oil and Gas Woes
Some may also recall the Saudi-Russia oil war that was touched off just prior to Covid-19 being declared a pandemic, which industry experts are now declaring to have been a massively foolhardy maneuver.
One industry resource predicts that U.S. oil production will suffer significantly over the next 18 months, possibly losing several million barrels in production per day. They are basing this upon a likely increase in global oil supply surpluses, ranging from 800 million to 1.3 billion barrels in the first six months of 2020.
Pointing to the drop in gasoline purchases as citizens self-quarantine, work from home, cease recreational travel, as service-oriented businesses close their doors, and fuel purchases from airlines that have been financially beleaguered for years fall even further, some experts are predicting devastating economic repercussions for the oil and gas sector.
In response to all of this, last week President Donald Trump said that he has directed the U.S. Department of Energy to purchase crude oil for the Strategic Petroleum Reserve in an effort to support the battered energy sector.
Fears and the Financial Breakdown
One interesting analysis cited how industrialized we are as a nation, with our energy breakdowns as Industrial (32%), Transportation (29%), Commercial (18%) and Residential (20%) (DOE). “Just commuting to work takes and costs the average worker about $2,600 a year, which translates to about $330 billion/yr ($28 billion/month). If 80% of commutes stop for 3 months because of the pandemic, then we will lose about $67 billion in gasoline purchases.”
Thus, we stand to lose billions due to the loss of dollars being spent in the oil and gas sector. If Americans remained in self-isolation for 3 months, it could cause significantly less energy use in the first three sectors, which could lower energy use by about 15 quadrillion BTU.
On the other hand, all of this sheltering in place and consuming a great deal of energy consumers would not ordinarily have consumed at home has an upside for the energy industry too. “At first, one might not think that’s much, but a study by SaveOnEnergy shows that something like binging Netflix uses more energy (and emits more CO2) than you might think… DOE has been following this issue for years. Data centers and server-farms are one of the most energy-intensive building types, consuming 10 to 50 times the energy per floor space of a typical commercial office building. Collectively, these spaces account for approximately 2% of the total U.S. electricity use, and as our country’s use of information technology grows, data center and server energy use is expected to grow too.”
The Threat to Other Operators
Other energy producers are also likely to be affected, with coal projected to be hit fairly hard. The National Mining Association has asked the President and congressional leaders to ensure that coal companies have access to the necessary cashflow needed to continue operations. Coal plants have only about two months of fuel on hand, so the pandemic threatens that supply.
Nuclear, on the other hand, is likely to be the least impacted by the Covid-19 pandemic, say the experts. Aside from having extremely comprehensive security and disaster protocols in place as a matter of course, nuclear plants have years’ worth of fuel onsite—certainly enough to ride out this pandemic.
As far as renewables go, this sector has no fuel to be concerned with, but these operations typically require natural gas as backup in most localities. As long as they have gas, they can keep running.
In fact, there isn’t much of a threat to the operation of local utilities per se, since disaster planning is an essential part of electric and gas utilities, which regularly deal with hurricanes, earthquakes, cyberattacks and other potential infrastructure disruptions. In the wake of the SARS virus outbreak, utility and energy industries began to develop detailed pandemic plans over a decade ago.
To address the fears of Americans who have lost jobs or been laid off due to the pandemic and who fear having their utilities shut off for non-payment, some governors and state officials are urging utilities not to disconnect customer accounts for non-payment, to waive late fees and offer payment plans until the pandemic has passed.
The Covid-19 pandemic’s effects on energy use are definitely going to be complicated, and it will take some time to assess precisely what the long-term effects will be. It is already changing how we live, do business and how we use energy—but we’ve undergone similar paradigm shifts before, and are likely to in the future.