The oil and gas industries are facing difficulties for many reasons right now. Some are preexisting conditions from 2019 and earlier, including a years-long decline in production — a loss of 3.5 million barrels per day — from Iran, Libya and Venezuela.

However, the Coronavirus, now officially a global pandemic, is effectively unprecedented. Mandatory business shutdowns, self-isolation among the public, declines in tourism, airline bookings, brick-and-mortar shopping and less vehicle travel of all kinds have all contributed to making 2020 a surprising year where oil and gas are concerned. The companies themselves are lowering demand by instructing employees to work from home while they await widespread testing.

Experts thought 2020 would see these industries rally dramatically. Instead, something else happened.

1. Is Coronavirus Affecting Oil and Gas?

How are COVID-19 and oil and gas affecting one another? Why is this happening?

Part of the issue is that the oil market began 2020 with overabundant supplies throughout the world, as well as falling prices thanks to a Russia-Saudi Arabia price war over crude oil. All that’s transpired since then — most notably the global coronavirus pandemic — only made worse what was already an unfriendly situation for investors.

Fatih Birol, head of the International Energy Agency (IEA), expressed in January that he expected the world’s oil market to remain at a one-million-barrel-per-day surplus through the first half of 2020.

The natural gas industry has also been on a high-production run for much of 2019 and 2020. In 2020, the U.S. plans to add 9.3 GW of natural gas energy-generation capacity for 9.31% of proposed projects. According to the Energy Information Administration, most newly installed capacity in 2020 will come from renewables like wind and solar farms. Still, experts predict the demand for natural gas to be strong.

This news has been welcome for anybody who buys gasoline or natural gas to power their homes or vehicles. However, the arrival of COVID-19 as a full-blown global pandemic signals significant worries for the industry itself.

Calls to self-isolate and limit travel while coronavirus infections tick upwards has caused a sharp decline in the demand for oil and gas. The IEA’s latest report for the first half of 2020 indicates the first drop in global demand for oil since the 2009 recession — a decline of 90,000 barrels per day in 2020 compared to 2019’s 99.9 million barrels per day.

2. Can Governments, Industries and Investors Do?

The Trump administration has already made moves of its own to help the oil industry get out of its low-price slump. On March 13, after the administration instructed the Department of Energy to buy “billions and billions of dollars” of crude oil to shore up the nation’s strategic reserves of petroleum, oil prices rose by 5%.

Nevertheless, there’s trouble ahead for many of the world’s oil and gas producers. Research from energy data company Enverus indicates that “production prices” are ticking significantly higher than “benchmark prices,” which is a sign that may presage bankruptcy if prices and demand don’t begin to increase soon.

Oil prices are always changing due to a variety of factors, including the change of seasons, natural disasters, geopolitical conflicts and changes in leadership. Global pandemics have always been a theoretical entry on the list, but now it’s a reality. Coupled with warming weather and the other factors already mentioned, this situation has the makings of a proverbial perfect storm for fossil fuels — one that has many predicting an even stronger standing for renewable energies.

While the EIA previously anticipated the United States’ exports of liquid natural gas (LNG) to remain globally competitive until 2030, the reality is now quite different. Likewise, most news outlets in early 2020 predicted oil output in the U.S. to rise by an even higher margin than previously expected.

Now, a convergence of factors, the most recent of which is COVID-19, means a highly unpredictable road ahead for companies and their investors.

Calling into question the EIA’s findings, the president of NUS Consulting Group, Richard Soultanian, said in an interview that, “COVID-19 is causing oil prices to rapidly decline, which most likely will result in lower 2020 U.S. crude oil production than initially forecast — thereby curtailing some of the production of associated natural gas.”

​​​​​​​​​​​​​​3. News for Oil and Gas May Be Good News for Others

The unpredictable demand for oil and gas over the coming weeks and months means a continuation of low prices and subsequent downturns in production to attempt to keep costs stable. Investors have little to do at this point except wait and see — and perhaps lobby governments for additional bailouts, like those proposed by the Trump administration and others yet to come.

Oil magnates like Jeff Hildebrand and Harold Hamm have been hit hard enough by the collapse of oil prices that they’re no longer in Bloomberg’s index of billionaires. For the majority of the world’s population that hasn’t padded their portfolios with oil and gas futures, however, most of these developments are welcome changes.

The idea of contracting a deadly illness is real, but the concept of a world with vast oil and gas reserves and low prices is probably appealing to many. The coronavirus and its low oil prices may impact renewable energies over the short term, but in the long run, they’re still the heir apparent, according to many industry experts.