Today we have a very clear view of our civilization’s dependence upon energy. Or, really, the effect when we break that dependence. The break is caused by COVID-19. The effect is the near total stoppage of the economy as governments have ordered stay-at-home isolation. Thus, with no one going to work, or working, or returning from work then we consume a lot less energy.
Oil remains the dominant source of our civilization’s energy. Not long ago a barrel of oil was trading for well above $100US per barrel. Today, in the futures market, the cost of a barrel of oil has gone negative! That’s right, effectively producers have to pay someone to take the oil of their hands.
What really happened? Simply put, the oil producers did not want to contract their operations even though COVID-19 reduced demand. Thus for weeks they have been pumping an excess of up to tens of million of barrels of oil each day. Obviously if it’s not being consumed then it must be stored. And storage costs money. And the available storage space shrank very fast. Thus the drop in price.
Which of course brings up a sticky point. As the producers stop producing they will stop their oil rigs. And walk away. For example, Canada last week provided $1.7B to clean up orphaned wells. Orphaned means that the producer has walked away and the government must clean up their mess. Their sticky mess.
Expect COVID-19 to be temporary and this situation to be temporary. But it does highlight our civilization’s approach to resource extraction. That is, we are keen on getting the value from the resource but less keen on spending money to clean up the mess. Is this a sustainable plan with which to go forward? Which dependencies should our civilization maintain?