Talk by Simon Pirani at a ScotE3 meeting on 10th May 2020

1. Scot-E3 webinar
Covid-19 and oil
extractivism
Simon Pirani
Author of Burning Up: A Global History of Fossil Fuel Consumption
Senior Research Fellow, Oxford Institute for Energy Studies
@SimonPirani1 ■ www.simonpirani.com
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2. Covid-19 and climate crisis:
aspects of the Anthropocene
► Johannes Vogel, director of Berlin Museum of
Natural History, 9 April: “Our arrogant relationship with
nature fuels, and even causes, many of humanity’s
greatest challenges. The threats we face are
interrelated: climate change, the loss of biodiversity
and the emergence of entirely new pathogens that
threaten us time and again.”
► We need to think in terms of inter-related threats,
not about “when this [Covid-19 emergency] is over”.
►And we need to ask: who is “we”? These threats are
generated not by undifferentiated humanity, but by a
society divided by class and neocolonial power relations
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3. Oil demand has crashed
►Oil demand in 2019 was 100.9 million b/d
►Demand in April 2020, implied estimates:
72 million b/d (Int’nl Energy Agency)
82 million b/d (US Energy Info Agency)
65 million b/d (Trafigura)
►Estimate of demand in 2020 as a whole:
91.6 million b/d (IEA)
►Output cuts agreed by OPEC+, from May:
9.7 million b/d (IEA)
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82
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89
90
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2005
2006
2007
2008
2009
2010
2011
2012
Global oil use, million b/d
What happened in
the last recession

4. Crude oil
prices: the
G20 /
OPEC+
deal did
not stop
the fall,
but China
recovery
may do
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Oil
The main driver is
demand collapse,
caused by coronavirus
and the resulting
economic crash
9 March. OPEC+ fails
to reach agreement 12 April. Deal
on 10% supply
cut brokered by
G20

5. 5
Demand for oil products has fallen through the floor
Source: Financial Times, 2 April
■ At the end of March, global road transport was 50% down year on year (IEA)
■ Globally, car manufacture looks like it will be 20% lower this year than last

6. Aviation and
just-in-time
supply chains
►More than 60% of commercial aircraft are grounded
►Delta Airlines, the world’s largest airline, says it is losing
$60 million a day
►Boeing cut production by one third in April
►Just-in-time supply chains, designed for low-cost efficiency but
not sustainability, have been disrupted 6
►Daily international
flights down by 87%
since January

7. Greenhouse gas emissions likely to fall by
2 billion tonnes (5%+) this year
► “Even this would not come close to bringing the 1.5C
global temperature limit within reach. Global emissions
would need to fall by some 7.6% every year this decade
– nearly 2,800 million tonnes of CO2 in 2020 – in order
to limit warming to less than 1.5C above pre-industrial
temperatures” – Carbon Brief
►Demand for coal and gas (used to produce electricity
and heat, and for industrial processes) has fallen less
sharply than for oil (used for transport)
►Society’s need to transform industry, agriculture,
urban built environments and transport systems will
certainly survive Covid-19
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8. Oil industry consolidation
►International oil companies are slashing investment, laying off
workers … and preparing to swallow smaller rivals
►US shale producers, already heavily in debt, may not survive
Covid-19. Whiting Petroleum is bankrupt
► “They [Exxon and other IOCs] prefer all the independents to go
bankrupt and pick up the scraps.” - Scott Sheffield, CEO of Pioneer
Natural Resources, DeSmog Blog, 27 March
►”We face the very real danger of an emboldened and resurgent
oil industry, positioned ever more centrally within our political
and economic systems. Such an eventuality would be a disastrous
outcome to this current pandemic” – Adam Hanieh (author,
Lineages of Revolt: Issues of Contemporary Capitalism in the
Middle East), 9 April
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9. The impact on producer nations
Fiscal breakeven price = the price the nation’s government says is
needed to balance the budget. Graphic from PM News, Nigeria
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10. The impact on producer nations
► Russia balances its budget at about $40/barrel, and has
$170 billion in sovereign wealth fund
►Saudi Arabia, Qatar, Kuwait and UAE have substantial cash
reserves … but even they are borrowing, and cutting spending
►Algeria announced 30% budget cuts; Iraq says half public-sector
wages are in danger
►Nigeria has made budget cuts, devalued the naira, considered
junking petrol subsidies and sought $7 billion emergency loans
►Pemex of Mexico, already heavily indebted before the Covid-19
emergency, is in financial trouble
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11. The North Sea
► “Our current estimate is that up to 30,000 jobs could be lost
over the next 12–18 months” – Oil & Gas UK, 28 April
►BP has put Clair South project on hold. Final investment
decisions on the Jackdaw project (Shell) and the Platypus project
(Dana Petroleum) have been postponed.
►”We need government support” – Ross Dornan of Oil & Gas UK.
(Really? And did the royal family say, “we need free money”, too?)
►The Sea Change report (published last year by NGOs) argued
that any serious approach to tackling climate change involves
ending subsidies to North Sea production and winding down
production
►That raises the question of “just transition” away from oil & gas
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12. Thoughts on the longer term
►When, and to what extent, oil demand will recover is
unclear. Capitalism’s tendency to expand aggressively
as it emerges from crises it has created is clearer
►Some mainstream commentators think the jolt to
rich-world use of cars and airplanes is strong enough
that oil demand will never return to the 2019 level
► This may be. But changes to economic structure on a
much greater scale will still be needed to tackle global
warming
►People in oil producing countries outside the rich
world will be hard hit by the economic depression. The
logic of “keep it in the ground” has never been stronger
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13. Published August 2018
"Insightful, precise and well-written, Burning Up
turns energy consumption on its head. Pirani
fills a crucial gap ... Anybody fighting climate
change should read this" - Mika Minio-Paluello,
campaigner at Platform London and co-author
of The Oil Road: Journeys from the Caspian Sea
to the City of London (Verso, 2013)
"This meticulous depiction of how fossil fuels
are woven into our human systems - not only
technological but also economic, social and
political - is an invaluable aid to getting them
back under control" - Walt Patterson, author of
Electricity vs Fire (2015)
"Explains the technological, social and economic
processes that have prioritised a particular way
of satisfying society's demand for energy
services" - Michael Bradshaw, Professor of
Global Energy, Warwick Business School, UK,
author of Global Energy Dilemmas (2013)
@SimonPirani1 ■ simonpirani@gmail.com 13