Insights Magazine: The path to net zero

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Editors note from Emma Slawinski

Across the globe, economic and social activity has been ramping up in recent months after widespread lockdowns to control the spread of coronavirus.

The reopening of schools and universities in many countries should deliver a further boost, but with cumulative coronavirus cases worldwide standing at more than 25 million as of early September, it is clear that there is no quick and easy path to recovery.

The impact has been felt on all commodities in some way, but performance has diverged widely between products since the beginning of the year. Energy has borne the brunt of demand destruction, while precious metals have benefited from their traditional appeal as safe havens for investors and risen substantially as a result.

Shuttered economies early this year, combined with a cut-throat battle over oil prices between Saudi Arabia and Russia, left crude markets reeling. A turbulent first half intensified scrutiny about how the oil demand curve will evolve in the decades to come and how new habits might constrain expected peak demand. There is also the potential impact of green recovery plans launched by national governments seeking to pivot toward decarbonization and sustainability as they emerge from the crisis.

This edition of Insight takes a detailed look at the prospects for Asian oil and oil product demand, finding a relatively subdued picture for the rest of 2020, although a rebound in major Asian economies is expected in 2021.

In China, the government has introduced a new twist to the traditional infrastructure-based stimulus package. This time, the country is backing high-tech infrastructure to support a greater share of renewable energy in the mix and the electrification of transport.

Our cover story delves into the energy transition strategies of some of the world’s largest integrated oil companies, and weighs their net zero emissions commitments against expected future oil demand, as well as the shift that would be required in capital expenditure, away from crude production and toward clean energy.

The volatility in commodity markets this year has underscored the importance of rigorous and reliable benchmarks to determine value. The considerations for pricing Middle Eastern crudes, as well as a US Gulf Coast export stream still in its infancy, are explored.

Another big theme to watch in commodities is the move toward deglobalization of supply chains. This was arguably already under way, but the pandemic is likely to have concentrated the minds of national governments. The trend is especially clear in the global lithium-ion battery sector, as investment flows into the EU rise while those into China decline .

Finally, our annual Top 250 Global Energy Company Rankings show how state-owned energy giants dominated in terms of financial performance last year, while gas and LNG also played a role in fueling energy company growth.

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Read the first article from Insight Magazine