By Anna Edwards and Laura Hurst
The global spread of the virus has roiled oil markets, dragging down profits at some of the biggest producers and promising worse to come next quarter. But the long-term impact on the way consumers work and travel could be even more devastating for the industry.
“There will be changes, and therefore we have to be ready for that,” Royal Dutch Shell Plc Chief Executive Officer Ben van Beurden said in a Bloomberg Television interview. “That means that we probably have to re-establish what is going to be our strategy.”
The Anglo-Dutch major on Thursday cut its dividend for the first time since the Second World War as the oil slump dragged first-quarter earnings down 46%. The company presented a bleak outlook, citing prolonged economic uncertainty, lower commodity prices, higher volatility and persistent weakness in demand.
Lifestyles will probably “be altered for some time to come, whether that is because of the economic bandwidth that people will have or businesses will have, or whether it is because of attitudes,” Van Beurden said. “We do not expect a recovery of oil prices or demand for our products in the medium term,” he said later in a press briefing.
Attitudes have of course been changing for some time as the world shifts gradually toward cleaner forms of energy. Mounting pressure from customers, governments and — increasingly — investors has seen large oil companies make ambitious promises to slash their carbon emissions.
Yet many, including Shell, haven’t provided a blueprint on how much they’ll invest in clean energy to fulfill their long-term pledges. Now, with the coronavirus crisis reshaping the entire oil market and the future of consumption, such investment plans may be brought sharply into focus.
“Will demand ever go back to where it was? That is hard to say,” Van Beurden said, acknowledging that the likelihood of oil peaking this decade “has indeed gone up” amid the market turmoil. “We live in a crisis of uncertainty at the moment; we don’t know what is on the other side.”