THE RISE OF GREEN ENERGY: A SILVER LINING IN THE PLUNGE OF THE OIL MARKET 2020

The glory time of oil had past us long ago. Now is the time for us to truly embrace the green energy.

Let’s walk the talk.

Badrul Munir
Why Today's 300% Oil Price Crash Isn't As Bad As It Seems ...

On 20 April 2020 (Monday), history had been recorded when West Texas Intermediate (WTI), the US benchmark, plunged lower than $0 to $-37.63 a barrel on New York Mercantile Exchange (NYMEX). Lowest since 1983. A troubling sign of an unprecedented global energy glut as coronavirus glut had made the chaos in global scale. What a way to start a week. Luckily, this is not the end of the world. So, no need to fear. 

WTI future expiring in May plunged 321% and had been traded as low as -$40.32 a barrel on the day of chaos. Other crude oil like Maya (Mexico) and Tapis (Malaysia) also recorded a decline in price.  

Crude oil is one of the commodities to trade on future contract. The plummet of the oil price is only for contract on May 2020. Experts forecast the oil price to rebound to a higher price in June, however, it depends on world’s progress to contain the coronavirus pandemic.  

Due to the abnormal shock of supply and demand, the oil prices had been like a roller-coaster in the past month. The historic deal, facilitated by U.S. President Donald Trump, between OPEC+ de facto leader, Saudi Arabia Russia had signed off to cut the oil production to save the global oil industry. This is the most ambitious bid to rescue the industry had ever seen. Yet the Monday slump made the OPEC cartel and its partners painfully experience their limitation of power. 

Reuters Graphic

In crude and LNG, the investment that had been planned before the crisis need to be delayed or even worse, scrapped. According to consultant Wood Mackenzie, up to $210 billion of investment are now at risk due to coronavirus.

One for sure, cheap price of oil will be the new normalcy after this crisis. Any investor must seek a new field to explore for investment, so here we are. The green energy.

The high cost for utility scale solar, wind and battery project are for upfront capital, given that the operating costs tend to be minimal. As the central bank lower the interest rate and government give stimulus package and project when The Great Lockdown is lifted, green energy must seize the moment and capture a bigger share of investment.

Renewable energy might be able to green a desert | Science News ...

The bright prospect of the green energy promising massive potential for us to invest after the crisis. It’s not about there are not enough commitment towards green energy before the crisis, but what it really means is enhancing green energy in the industry (now) will be a game changer in the energy industry. 

Resources have been a political instrument between countries for centuries and oil is no different. World post-WWII had recorded the First Oil Crisis (1973-74), Second Oil Crisis (1979-80), Iraq War (2003), mass production of shale oil (2015) and oil crash (2020). It is crystal clear that the oil market is too volatile and exposed to a political situation.  

Hoping the oil prices to be as high as $100 per barrel after the crisis is no different as hoping a chicken could fly as high as an eagle. The glory time of oil had past us long ago. Now is the time for us to truly embrace the green energy. 

Let’s walk the talk. 

– Badrul Munir – 

Reference: 

  1. Saloni Sardana, Business Insider [20th April 2020], Oil plunges 321% into negative territory for the first time ever as demand evaporates, 
    //markets.businessinsider.com/commodities/news/us-crude-oil-wti-falls-to-21-year-low-1029106364 
  1. Clyde Russel, Reuters [4th April 2020], Renewable energy wins over oil and gas in post-coronavirus world: Russell, 
    //www.reuters.com/article/us-column-russell-health-coronavirus-cli-idUSKBN21P0L5 
  1. Grant Smith, Bloomberg [21st April 2020], OPEC+ Bid to Save Oil Industry Overwhelmed by Demand Crash, 
    //www.bloomberg.com/news/articles/2020-04-21/opec-bid-to-save-oil-industry-overwhelmed-by-demand-collapse?srnd=markets-vp&utm_campaign=socialflow-organic&utm_source=twitter&cmpid%3D=socialflow-twitter-markets&utm_medium=social&utm_content=markets