A Perfect Pandemic Storm: The COVID-19 Energy/Oil Crisis Explained

Christopher Johnson

Christopher is an energy policy/public affairs professional based in Washington, D.C., focused on market-based carbon policy.

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11 Responses

  1. North says:

    I value and applaud your analysis but the more prescriptive section of your article is raising a few of questions for me:

    -Has the US ever had government caps on oil/gas production? I mean the idea of bringing OPEC and OPEC+ to the table and demanding production cuts while not cutting American production strikes me as an exercise in idiocy (so probably Trump will go at it tomorrow) if the US isn’t proposing to impose production caps as well but as far as I know (and I’m far from an expert) the entire legal and logistical structure to do so in the US simply doesn’t exist. I’m also far from convinced that it SHOULD exist.

    -Wouldn’t this amount to an attempt at bailing out fossil fuel energy producers? That strikes me as nonsensical. The oil wells aren’t going to dissolve into fog- if Russia succeeds in driving current shale producers out of business then new ones will arise from their ashes the moment oil prices rebound. If Russia’s goal is to wipe out American oil production capacities it strikes me as a goal doomed to failure. Short of dropping in some Russian engineers and blowing up or otherwise destroying the deposits or somehow making the world collectively forget how to frak for oil (or electing Bernie Sanders I guess) I don’t see how Russia could ever hope to get that genie back in the bottle.

    -And once we establish that Russia cannot permanently destroy America’s oil production capacity with these shenanigans (if we can even call them shenanigans) again should we really be bailing out the fossil fuel energy industry? Frankly with low pump prices maybe instituting a carbon tax would be a better idea while the pain point of such an endeavor is low. I can’t think of many actors in the industry less fondly viewed by voters as fossil fuel producers. I’m definitely not seeing the political upside.

    -I mean what this boils down to seems to be Saudi Arabia and Russia gouging each other’s eyes out. America is a big oil producer, sure, but we’re not a petro-state. What possible reason does the US have to do absolutely anything about this beyond popping some popcorn and enjoying the show?Report

    • Michael Cain in reply to North says:

      Short answer: see Texas Railroad Commission, from roughly 1917 to 1972. The Commission spoke, producers in Texas/Oklahoma listened. The TRRC set production limits with the intent of keeping the price stable. They were relatively successful for a long time, but during one of the oil crises in the 70s they ordered opening the spigots but nothing happened — the Texas/Oklahoma producers were at capacity.

      An old joke asks why OPEC wasn’t as successful at controlling prices as the TRRC. The answer was that OPEC didn’t have an equivalent of the Texas Rangers, whom the TRRC could order to go in and shut down wells.Report

      • North in reply to Michael Cain says:

        Thanks Michael. Seems to me that the US would still have logistical and legal trouble setting up a comparable system to control fracking in all the major producing states. And I still don’t grasp why on earth the US would wish to.Report

    • Oscar Gordon in reply to North says:

      Kinda agree here. I know energy import/export markets are complex things, and not all oil is created equal so we can not simply decide to withdraw from the international oil trade, but all of this smacks of Russia angling for a short term gain that they will not be able to sustain.

      I do agree that closing off public and private reserves as much as possible is a good idea. If the market is going to be flooded, no reason to keep those spigots open.Report

  2. Chip Daniels says:

    A fine analysis. But this part:

    “…there is no excuse for the most powerful nation on Earth with the largest energy industry in human history to be held hostage by the likes of Vladimir Putin and his oligarch friends. President Trump and his representatives must bring all of these parties to the table…”

    Oh, honey…Report

    • PD Shaw in reply to Chip Daniels says:

      Or this part: “Policy leaders need to bring international leadership to the table and create global solutions to this global problem.”

      EU member states can’t agree to a policy on face masks amidst a pandemic. The EU is real, the international community is a fiction.Report

  3. Jaybird says:

    I have a decision to make PDQ.

    We bought tickets to go to EPCOT back in December. The trip itself kicks off Thursday. Fly from Colorado to Florida, stay in a nice hotel, visit the uncles, see a fireworks show, ride the rides, eat the food, delight in the Happiest Place On Earth… fly back on Tuesday.

    *OR*… stay home. Don’t get on a place twice. Don’t wander around one of the biggest tourist attractions in the world. Don’t visit my uncles who, lemme tell ya, ain’t spring chickens. Maybe not *CANCEL*… but maybe reschedule?

    If everything was as bad as it was last week, it’d be an easy call to make. Hey, wash my hands, use hand sanitizer, don’t touch my face, I don’t care if your nose itches, don’t touch your face.

    But things have gotten worse every day since last week and they have been getting worse in worse ways every day since last week and the worse ways are new and novel.

    None of the trends involved are slowing down.

    If things had stopped getting worse in increasingly worse ways, I could see going out there and bragging about how the park was nigh-empty and how nice that was. EPCOT Morocco has the best dinners! Here’s a selfie!

    But now the daydreams involve learning halfway through that someone tested positive at the park when we were there… and all of the secondary effects that follow from that.

    And that’s without even worrying about whether we’ll ever be able to buy toilet paper ever again.Report

    • George Turner in reply to Jaybird says:

      That’s a hard call. Florida doesn’t have a lot of cases.

      Florida announces eight more cases, which was just a few minutes ago according to Google. There are no cases in Orange or Oskeola counties where Disney World is located.

      Virtually all the cases seem to be elderly people and travel related. I would guess that they’re retirees who had just come back from Europe. Those people don’t go to Disney World because it’s expensive and local.
      It’s targeted at bringing tourists to Florida, not retirees in Florida.

      Trans-Atlantic travel has dropped dramatically, so there probably aren’t many Europeans going to Epcot these days. The people who favor European vacations and Italian ski vacations are also not the type to go to Disney World, especially in the same month, as most people don’t mix and match long vacations.

      The park might be safer than the airport or the airport shuttle bus, since those would have locals returning from all over the place and not going to Disney World.

      I’ll also not that Disney is bound to have their own huge stockpile of toilet paper, which you could “liberate” for the people.Report

    • Jaybird in reply to Jaybird says:

      Aaaaaaaaaaaaaand we just cancelled.Report