The novel coronavirus has fundamentally changed the way that we consume energy and fuel around the world. The extreme and unanticipated slowdown of economy and industry has led to a sharp decrease in oil and gas demand, and has even led many to question whether we are now unequivocally headed toward “the end of oil.”

While a move away from fossil fuels has been an inevitable side effect of the pandemic, many global leaders have suggested that the world should seize this opportunity to double down on the global green energy transition by implementing policy measures and encouraging ESG investments. Indeed, many countries are already in the process of drafting “green” stimulus packages as part of a movement to redirect the global economy toward decarbonization and build what the World Economic Forum has advocated as a “new energy order” and a “great reset.”

While this is extremely hopeful news for a planet facing all the problems associated with climate change, it is decidedly terrible news for the oil industry, and especially the long-suffering shale industry in the United States, which has been in a state of severe decline for years now. Few sectors were hit as hard by the pandemic as U.S. shale, which saw its West Texas Intermediate crude benchmark plunge into negative figures in a previously unthinkable turn of events on April 20th, ending the day at nearly $40 below zero. 

In the absence of gasoline demand, refineries have been casting around for alternate solutions to keep their plants up and running, and it looks like they may have found the answer: biofuels. Early on in the pandemic’s trajectory, things looked just as bad for the biofuel sector as nearly every other economic sector – which is to say, pretty dismal. While it may seem like fossil fuel and biofuels would be natural competitors, the oil price crash actually posed a great threat to biofuel markets as well. “Crude’s nosedive erases any chance of discretionary blending of palm oil with diesel, and drastically inflates the cost of government mandates,” reported Bloomberg back in March. “Biofuels, such as a blend of diesel with palm, need to be attractively priced compared with fossil fuels to encourage consumption, and that often requires subsidies.”

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Source: Oilprice