The instability of the global oil markets is nothing new. In my lifetime I have seen a lot of fluctuation in the oil markets. At 17 years of age, going through the first recession that really affected my earning potential with the pretended oil crisis and embargo in the United States, this was my first reality check to people beating each other up at the gas pumps to get fuel for their vehicles. At 60, believe me it has not gotten any better.
Last Monday for the first time in history, oil closed in the negative territory. West Texas Intermediate crude the benchmark used for pricing fell to a negative $36.20 a barrel, crazy to say the least. No one in the energy business could have ever predicted this. Covid-19 has severely reduced oil demand around the world due to large declines in airline, car, shipping, and trucking traffic as well as manufacturing production.
China, as it turns out, is one of the biggest beneficiaries of this pandemic. China being the largest importer of oil has been stockpiling oil now for months, no real surprise there. Oil’s pricing has always fluctuated on the instability of global markets from political unrest, storms in the Gulf, the invasion of Iraq and on and on. The big wheel keeps on turning.
Now today oil closed at $14.20 a barrel on the news that President Trump ordering the U.S. Navy to shoot down any Iranian ships that harass our ships in the Persian Gulf. It is a crazy industry that will only get crazier in the coming years. This pandemic will surely test Americas resilience in the energy sector. 58 more oil rigs were closed in April bringing the U.S. count down to 504 more than a 50 percent decline compared to this time last year.
With the current realization by the big houses including Goldman Sachs that the fracking Industry is no longer a viable business and these businesses were not profitable since money has been pouring into them beginning in 2004 will weary investors really get back in the game.
In fracking when a well is operational after the first-year production goes down by 50 percent after the second year 80 percent it’s a leap frog effect always pouring the monies made from the first well to pour back into the ground to build and operating additional wells all at the expense of the environment. In Houston Texas, the oil capital of the world 60,000 oil workers were laid off in April and oil and gas company bankruptcies are prevalent.
Over the last few weeks people have been asking me since oil is so low is the renewable energy industry in trouble, my reply is always the same, we as an industry have fought for every inch of what we have, what we have accomplished and for every project we have installed and there is one thing that you can always count on is the fluctuation of oil, believe me on this one greed will make sure of it. What goes down must come up and visa versa, so enjoy the ride while it last, because believe me it will not last long. The big wheel keeps on turning.
Jeffrey Voacolo is the vice president and chief operations officer of Micronesia Renewable Energy. Send feedback to email@example.com