It’s time we all got behind our oil workers
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It was like being at the top of a rollercoaster. Then falling, falling, falling with no control over the drop and no idea when or where it would end.
In the UK it was the early evening of Monday, April 20. I was actually on a long weekend break of doing nothing after Covid-19 scuppered a planned trip of ex-uni pals to see a band down south.
So, I was flicking through Twitter and saw signs that trouble was brewing. Tweet after tweet was telling me that something bad was happening to the price of West Texas Intermediate (WTI), a grade of oil used as a benchmark for pricing in the United States.
The tweets intensified in volume and urgency. They started off as casual mentions as the oil price slipped down into the high teens of dollars per barrel. Then accelerated to capitalised shouts as the price dropped to cents per barrel, then screams as it neared the zero barrier and crashed through into negative pricing.
And as the price continued to go further and further down the shouting and screaming was replaced by a nervous quiet as the world tried to work out what was happening and what it meant. It wasn’t a fun ride any more. We were gripping on to the sides of our rollercoaster carriage with our eyes shut, feeling a bit sick, and just wanted it all to stop.
I don’t know if it was the affects of the adrenaline or the fear but I was literally shaking. Text and WhatsApp messages started coming in asking the same things: had I seen what was happening to the oil price and what did it mean?
So, at the end of trading on that day, the price of WTI came to a halt at almost minus $40 per barrel. That means, instead of making a profit, folk were offering to pay others nearly $40 to take each barrel away. That’d never happened before.
It came about because April 20 was the last day of trading on oil prices for May under WTI’s rules, and it was triggered by a realisation that oil storage space for May was extremely limited in the US. A bit like a last-minute end-of-season sale, trying to get rid of the old stock before the new comes in. The deadline day for June’s WTI prices is May 19 and at the time of writing there’s little to suggest that we won’t see the same degree of panic on that day too.
The world’s other major oil pricing benchmark is Brent crude. While Brent fell also, it faired better than WTI for two reasons. It has a more flexible pricing structure than WTI and, whereas WTI is landlocked stock, Brent can be shipped around the world to wherever there may be storage capacity. And while countries such as China are frantically building more storage space for oil, it’s not enough to cope with the volumes out there.
Covid-19 has wiped an estimated 20 million-plus barrels of oil demand off the world market. That’s because people aren’t flying or driving and factories obviously don’t need as much power in a lockdown. And while several countries have agreed to cut back oil production further than before by over 10 million barrels a day (after Russia and Saudi Arabia kissed and made up), it’s less than half of what’s needed to match falling demand.
Brent is struggling to hold around $20 per barrel now, and things aren’t looking like being radically better in the near future. As an indication, BP has set a breakeven cost of $35 per barrel for next year. Last year it was $56 a barrel.
Against this backdrop, Oil and Gas UK set out the stark warning that up to 30,000 people could lose their jobs, with our region at the epicentre. That’s not only a bitter blow for the individuals concerned, but also for their families, communities and local economies who benefit from oil industry incomes.
Now is the time for the Scottish and UK governments to step up and make clear what support they will offer to those threatened workers.
For two years at least, the industry has been calling for the UK government to agree a sector deal. We still don’t have one, although one of the key demands of the proposal – the National Decommissioning Centre – has now been established without a deal in place.
I fully appreciate there are sections of society against the oil industry. And if I ever met anyone who had forsaken all items of modern life reliant on oil or gas – all petroleum-related goods including fertilisers and pharmaceuticals; all plastics including bottles, phone, laptop and TV casings; all man-made fibre clothing; and, of course, fuels for transport, heat and lighting – they would have my full respect.
I haven’t met anyone who fits that bill, yet. But I have met plenty of decent folk who work long hours in often very difficult conditions to bring us the energy and power that we depend on right now to live our comfortable lives.
So, it’s about time governments and society at large stopped trying to brush this industry – these people – under the carpet as we focus on the longer-term goal of 100 per cent energy from sustainable sources. We all know someone who works in the oil and gas industry today. We need to publicly recognise the good that they do for us and support them at this most critical time.
- Andrew Bradshaw is head of energy insight at global corporate communications company Fifth Ring and is based at the company's Inverness office. He is internationally recognised as one of the leading experts in energy public relations.