Oil sector collapse has dire long-term consequences: UBC prof

VANCOUVER (NEWS 1130) — The world’s oil sector is staring down the barrel of drastic production cuts as COVID-19 keeps vehicles off the road.

The price for U.S. crude oil slipped below zero Monday amid the pandemic and traded in the negative for the first time ever.

While that may be just a market blip, for now, it’s a long-term sign of some difficult months ahead for energy workers, according to a University of B.C. economics professor.

Major oil storage facilities are filling up fast as the COVID-19 pandemic saps the demand for crude.

Werner Antweiler said it’s only a matter of weeks before there’s nowhere left to store it and companies have to drastically slash production.

“Once certain production facilities are closed, restarting them is very expensive and some oil fields also have lower productivity as a result,” he added.

“So starting and stopping is not a trivial kind of matter.”

That could mean some facilities never re-open, leaving even more people out of work.

“Companies will have to make really hard choices here,” Antweiler said. “They will be forced to cut back production because production has no place to go.”

He added workers employed in the oil industry in Alberta, the U.S. and elsewhere will feel the burden of what will transpire in the next few months.

Currently, producers are clamoring to rent tankers to store oil offshore until prices improve, he added, but don’t expect to see any of those floating in Canadian waters.

Antweiler expects gas prices to stay low into the summer, even the fall. But if there are shortages post-pandemic, prices will be driven back up.