Despite the coronavirus pandemic grounding global oil demand to a halt, oil producers continue to extract the fossil fuel—even as storage space is running out, the price of some crude is poised to go negative, and the climate crisis continues to highlight the urgency of a transition to renewable energy.
"How about we #KeepItInTheGround?" asked Nick Young of Greenpeace New Zealand on Twitter Wednesday.
The plummet in demand amid the "largely resilient" supply of the fossil fuel, CNN Business reported Thursday, "could mean a supply glut so epic that the world will soon run out of room to store all the unneeded barrels of oil."
That scenario may not be so far off in the future.
"Gven the current rates of production, if something is not done, we could see as early as late May, early June [that] we don't have anywhere to put the surplus production," John Driscoll, JTD Energy Services's chief strategist, told CNBC Thursday.
"We let the floodgates out and we're awash in seas of oil," he added.
As Reuters reported last week,
No comprehensive data exists on total storage volumes available in the petroleum supply chain or the amount unfilled at the start of the year, but the International Energy Agency (IEA) has said consumption could have shrunk by 20 million barrels per day because of the pandemic and national lockdowns.
If that is roughly accurate, storage will be filling at the rate of 600 million barrels per month.
And if Saudi Arabia and Russia increase their output as a result of the volume war by an extra 2-3 million bpd between them, the storage would fill even faster, at 650 million to 700 million barrels per month.
CNN put the figures in per-day terms:
In April, some 6 million barrels per day of "homeless crude" might literally have nowhere to go, JBC [Energy] said, a figure that would rise to 7 million barrels per day in May.
"It could get to the point where just bringing the oil to the market will exceed the value," Driscoll said, and he isn't alone in that assessment. From CNBC:
Analysts at Goldman Sachs have warned the coronavirus shock is “extremely negative for oil prices and is sending landlocked crude prices into negative territory.
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"Now there's a tremendous incentive for traders to store and hold oil given what we call the market structure known as 'contango,' where it's cheap today but you have a big incentive to hold onto that oil, defer it into the future," Driscoll added.
With storage facilities reaching capacity, some producers are looking at storing surplus oil on vessels at sea or even rail cars to supplement storage spaces.
"As storage space becomes harder to find, the prices, which have already fallen more than half this year, could drop even further," the New York Times reported last week. "And companies could be forced to shut off their wells."
That development is unlikely to upset climate camaigners like Nathaniel Stinnett, executive director of the Environmental Voter Project. Stinnett suggested universities that rejected divesting their endowments from fossil fuels may be having second thoughts.
"Even in isolation I can smell the panic sweat of every university investment officer who scoffed at the idea of divesting from fossil fuels," he said Wednesday.
Others echoed Young's assessment of the supply-demand disparity.
"How about we #KeepItInTheGround and leave it there?" said Sierra Club campaigner Ben Cushing.
The new reporting on the oil glut comes days after a group of 12 Senate Republicans asked Interior Secretary David Bernhardt to help out the industry amid the economic fallout of the COVID-19 crisis by suspending federal royalty payments for fossil fuels.
The request drew harsh criticism from Alan Zibel, Corporate Presidency Project research director at watchdog group Public Citizen.
"With demand for oil plunging and prices sinking to levels not seen in decades, the last thing we should do is prop up dirty energy companies by reducing the royalties they pay to access public lands and waters," said Zibel. "We should be using this crisis to pivot to clean, renewable energy, rather than aiding polluters that put the climate and our environment at risk."
The new reporting also comes as President Donald Trump—already accused of propping up the oil industry amid the pandemic—is set to hold an in-person White House meeting Friday with top fossil fuel executives to discuss relief measures for the industry.
Climate group 350.org said the reported meeting showed Trump needs to rethink his priorities.
"Right now money is needed for people's health, direct relief, and making sure we have a resilient future—not bolstering the fossil fuel industry," the group tweeted.