How Coronavirus Impacted the Global Energy Market

Government lockdowns have been implemented all over the world to reduce the rate of infection and lower the death toll caused by the coronavirus pandemic. This has meant that billions of the planet’s citizens have had to change the way they do things. One major area that has been impacted is the energy sector, as demand has dropped to its lowest amount in 70 years.

Positively, renewable energy production has increased the proportion it contributes to the overall fuel mix, this is primarily due to the demand for fossil fuel dropping dramatically. Adding to this, the reduction in overall energy consumption has meant that we have seen the largest ever fall in global CO2 emissions. This data comes from a new report from the International Energy Agency (IEA).

After analysing data from 100 days, the IEA believes that global energy consumption will fall by 6% in 2020, viewing it as a “historic shock to the entire energy world”. The report highlights a number of interesting areas of discussion.

The demand for gas and electricity has collapsed across the world, it dropped by 3.8% in the first quarter alone, compared to figures from 2019. The continued impact and its effects will ultimately depend on how long lockdown restrictions are kept in place by governments across the globe. The IEA estimates that demand could drop by as much as 6% this year on the assumption that lockdown is gradually eased.

Fossil fuels such as coal and oil were affected in a colossal way. In the first quarter of 2020, restrictions placed on economy activity pushed the global demand for coal down by around 8%. Demand on an industrial level also decreased, as factories in China were shut down. Travel restrictions contributed to a 5% drop in oil requirements, leading to a large surplus. Airlines grounded their fleets, airports were largely shut down (excluding essential flights), and there were fewer vehicles on the roads.

The only energy source to see an increase in demand was renewables. According to the IEA, the primary reason renewables such as solar and wind were able to increase their percentage of the energy mix was because they are unable to align their output in accordance with demand. As for the remainder of 2020, electricity generation from renewable energy sources is likely to continue to increase as production costs fall and a number of energy projects in the pipeline finally go live.

As the demand for fossil fuels sees record low numbers and renewable energy usage increases, the IEA has forecasted that we will see the biggest ever reduction in CO2 emissions. Yearly figures are expected to reach those from a decade ago.

Productivity has decreased exponentially across most sectors, and a rebound in economic activity will not be seen for quite some time while under lockdown.

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