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Economy & Business

What Is The Future Of The Oil Industry?


Oil and gas powered a century of economic growth and damaged the planet's climate in the process, which leaves the oil and gas industry in an existential panic. In the short term, demand is down because of the pandemic. In the long term, well, there are two new reports out offering very different visions of the future. NPR's Camila Domonoske covers energy and joins us now.

Hi, Camila.


SHAPIRO: Tell us about these two new reports. Where are they coming from?

DOMONOSKE: Yeah, so they offer very divergent perspectives. And let's start with the idea that oil will come roaring back. This is assuming that once the pandemic is over - someday it will be over, and the economy will recover - oil will come back. Demand will be there. The developing world is going to guzzle more and more of it - back to business as usual. This is the view that was laid out by OPEC, the cartel of oil-exporting countries, in their annual report called the WOO. Then...

SHAPIRO: OK. WOO - all right.

DOMONOSKE: Yeah, the WOO - woo oil. Then there's a different version of the future that was laid out by the International Energy Agency, which is a very influential group. They said maybe that happens, but maybe the world takes action on climate change. And if appropriate action is taken, oil demand could start going down and might even have peaked already.

SHAPIRO: So is the main divergence in these two reports the assumptions about whether the world will take climate change seriously and act to slow it down?

DOMONOSKE: Yeah, that's the fundamental disagreement. And this debate has been around for a long time. Will the world act aggressively? When will that happen? When will oil peak?

But right now, this pandemic, which is - you know, we use the word unprecedented so much, but something unprecedented has happened. There is a dramatic drop in demand for oil, massive job losses across the sector. And that has made some people wonder, could something else unprecedented happen? Could this unusual moment lead to an unusual level of action from world governments? Could the future arrive faster? Or are you OPEC and you look at this and say the pandemic is just a blip, and we'll be back to normal once it's over?

I'll note, too, there's one thing that both sides and pretty much everybody agrees on, which is that the current pledges, the policies that are in place from world governments now, are not enough to either keep global warming at the 2 degrees Celsius that was committed to at Paris or to shift the world meaningfully away from relying primarily on oil. So changing that would require a huge transition from what's currently happening.

SHAPIRO: Are oil companies making those kinds of transitions? I mean, they have to make decisions today based on which one of these two futures they think is the most likely, right?

DOMONOSKE: Yeah, absolutely. And you can see that split playing out across companies. I mean, just to take two examples, Exxon is doubling down on fossil fuels, predicting a future in which there is still robust demand for oil and gas. And they say they'll be there to meet it. Meanwhile, BP, formerly British Petroleum - they are projecting that the world might be moving really aggressively. And they want to be there, pivoting to renewables, trying to figure out how to make money on a world that's transitioning away from their core product, which some investors are skeptical about. So companies right now are placing their bets, betting everything on which version of the world they think is more likely.

SHAPIRO: It's hard to imagine any higher stakes here - not only the future of those massive companies but, like, the future of the planet, potentially.

DOMONOSKE: Literally - I mean, if Exxon is right and the future is a lot like the present, we're burning lots of oil, which has had the disastrous climate consequences that we see unfolding. And if BP and a lot of European supermajors are correct, then governments around the world might penalize carbon emissions, promote renewables. It would mean huge shifts, sure, in the energy industry, but it would help prevent the worst impacts for the planet, like you said.

SHAPIRO: NPR's Camila Domonoske, thank you.

DOMONOSKE: Thank you. Transcript provided by NPR, Copyright NPR.