Illustration: Aïda Amer/Axios
A new Wood Mackenzie report tries to grapple with ways that the coronavirus pandemic might be an inflection point for the global energy system that changes its trajectory for decades.
Why it matters: The consultancy concludes that, depending on how things shake out, the pandemic could greatly accelerate coal's decline and hinder the long-term growth of oil demand.
The big picture: "Earlier pandemics have changed the world, and so will COVID-19. The impact will often be greatest when it reinforces shifts that are already underway, but it is also driving innovation in ways that can create radical changes in corporate and individual behaviour," it states.
What they did: The report takes a stab at modeling the largely unknowable by grouping long-term post-pandemic futures into three big conceptual buckets.
- A "full recovery" scenario that assumes an effective vaccine; successful stimulus; and resumption of pre-crisis trade and travel. Corporate strategies and consumer behavior revert to pre-pandemic norms.
- A "go it alone" scenario marked by slow economic recovery; new trade barriers; limited vaccine effectiveness; and weak climate action.
- A "greener growth" scenario marked by aggressive policy support for low-carbon energy in economic response packages, tougher carbon pricing and more.
What they found: Big differences in the trajectory of different energy sources, which partly reflect the consequences of how governments craft their recovery packages.
Take oil. While all the possible futures see oil demand bouncing back to pre-crisis levels, things look a lot different by 2040 under the different cases.
- In "full recovery," oil demand will be roughly 113 million barrels per day in 20 years, an expansion of the 100 million barrel per day pre-crisis market.
- In "go it alone," that long-term growth is cut in half. The "greener growth" future, meanwhile, sees oil consumption going into a steep decline in about a decade, falling to around 83 million barrels daily by 2040.
What's next: The biggest difference in the three scenarios comes in the future of coal, which falls in all cases but at different rates.
- In "greener growth," global consumption in 2040 is only about 60% of where it stands in the "full recovery" case.
The Wood Mackenzie report captures several ways that global energy use and different corporate sectors are impacted by responses to the pandemic.
- One interesting one is how it could affect the movement of goods, which is an important driver of oil use via shipping, trucking and airplanes.
What they're saying: "The pandemic has exposed the risks in some critical extended supply chains, most urgently for medical equipment," the report notes.
- "The longer the crisis lasts, the more governments and businesses will seek to source commodities, components and goods that are less distant and more secure."