Good morning, hope you're staying well.
🎬 Tonight "Axios on HBO” returns at a new time! New York Gov. Andrew Cuomo reflects on the early days of the coronavirus and what could have been done differently (clip).
My latest column is a long view on the current oil turmoil. I'll share a glimpse of that, and then Ben Geman will get you up to speed on other news. Today's Smart Brevity count: 1,265 words, < 5 minutes.
Illustration: Aïda Amer/Axios
The reports of the death of the oil industry are, to quote Mark Twain, greatly exaggerated.
Driving the news: Progressive leaders are pouncing on the current collapse in the oil sector as a sign this is the beginning of its end and a turning point for the climate-change movement. Not so fast.
The big picture: Yes, the coronavirus is throwing the industry into its worst crisis ever. Thousands of workers and possibly hundreds of companies could go bankrupt in the coming months and years.
Where it stands: A lot of potential factors could make this moment in history the beginning of the end for the oil industry, but both history and experts suggest that absent explicit actions by governments, the long-term outlook for the oil industry is at least neutral, and even possibly positive.
Let’s look first at three factors suggesting the outlook will be positive for the industry, and then three that could change things.
Three industry positives:
1. Recessions put environmental concerns on the back burner.
2. Economic growth = oil demand growth
3. Unchanged government policies
Three industry variables:
1. Coronavirus-fueled changes in society
2. Stimulus plans
3. Presidential election
The bottom line: We might not be going anywhere right now, but neither is the oil industry.
Projections of deep pain in the oil sector are increasingly materializing on the ground amid the pandemic-fueled collapse in oil prices and consumption.
Where it stands: Oil prices are falling again Monday “as producers scrambled to shut down wells before the world’s crude storage capacity reached its limit,” the Wall Street Journal reports.
Why it matters: The bankruptcy is a fresh sign of what's now an ongoing decline in production — and a drilling pullback — in the U.S. and elsewhere that is battering companies and their workforce.
"The great Texas oil shutdown has begun," the Houston Chronicle reports.
The big picture: It has been clear for weeks that the price and demand collapse would start pushing output lower both in the U.S. and elsewhere.
By the numbers: The BW Research Partnership estimates that nearly 50,000 U.S. workers in oil and gas fields lost jobs in March. Their report on energy sector job losses calls their estimates "conservative" and projects they'll be worse in April.
Lower demand and prices are not the only forces behind production cutbacks — there's literally fewer places for it to go.
What they're saying: "Neither an earlier start of production curtailments by Saudi Aramco and Kuwait Petroleum Corporation, nor a historically large 500,000 bpd monthly U.S. oil production decline in May–June, will remove enough oil supply to avoid filling the world’s crude storage during May," Rystad Energy analyst Bjørnar Tonhaugen said in a note this morning.
Threat level: In the U.S. specifically, Reuters notes that "Cushing, the delivery point for WTI, was 70% full as of mid-April, although traders said all available space was already leased."
"Planned European Union rules requiring investments to be in line with climate policy should be used to guide economic recovery measures after the coronavirus pandemic, despite not yet being law, the bloc’s expert advisers said on Monday," Reuters reports.
Why it matters: It's the latest wrinkle in growing calls to orient huge financial recovery packages in Europe and elsewhere toward low-carbon industries.
But, but, but: In the U.S., GOP lawmakers and President Trump have pushed back against some Democrats' efforts to include provisions in the coronavirus response packages that would help shore up jeopardized renewables projects.
Several of the world's largest oil-and-gas companies will post first-quarter earnings this week, with BP reporting tomorrow, followed by Shell on Thursday and U.S. giants ExxonMobil and Chevron on Friday.
Why it matters: It will be the first — but not the last — detailed look at how the price collapse and pandemic will affect the companies' finances.
Separately, another announcement we'll be watching comes Wednesday after markets close, when Tesla posts its results.
Banking giant Morgan Stanley updated its environmental policy late last week, vowing that it will not "directly finance new oil and gas exploration and development in the Arctic."
Why it matters: Per Bloomberg, they're now the fifth major U.S. bank to say they will not back drilling in the region.
But, but, but: "There’s a limit to the bank vows, which generally only rule out financing tied to individual projects — such as underwriting a specific Arctic drilling venture. The pledges wouldn’t get in the way of a bank providing broad financing to oil companies that operate mostly in Alaska or the Arctic," the Bloomberg piece notes.