Will The Energy Economy Thrive After COVID-19? Depends Who You Ask.

Energy bulls say a return to vacation driving will spur higher gas prices. Other analysts think a higher-than-usual number of hurricanes could cripple Gulf Coast infrastructure.

By Alexandra HartApril 19, 2021 1:10 pm,

On Sunday, the U.S. government announced a milestone in the fight against COVID-19. More than half of adults in the U.S. have received at least one vaccination dose, and about 30% are fully vaccinated. Although that’s far from the 70 to 90% scientists estimate is needed to reach herd immunity, something resembling a normal summer is looking more and more likely.

But a return to normalcy is far from a certainty for the energy industry, still contending with a global economy that was turned on its head over the past year. Matt Smith, director of commodity research at ClipperData, breaks down the competing elements we may see in the energy industry over the next few months.

The Bulls

“Gasoline demand is going to be a key driver, really, of the U.S. energy complex,” Smith said. “We’ve got these vast swaths of the US adult population being vaccinated and the economy’s really going to kick up a few gears as bars, restaurants and venues reopen… The additional kicker is the international travel is going to be stymied because of further waves of the pandemic in Europe, Latin America and elsewhere, which means that the US population is going to be somewhat confined to domestic vacations, and hence road tripping.”

The Bearish

Perhaps the biggest headwinds for demand in coming months comes from the prospect of further waves of COVID from countries such as India, Brazil and Germany,” Smith said. “So while the U.S.A. is going gangbusters in terms of vaccinations…there are places where these places are outliers and we’re seeing vaccinations starkly lacking elsewhere. So, for example, only 1% of the Japanese population has actually been vaccinated. And this is key because the Olympics are going to be within less than 100 days away.”

The Wildcard

We had this crazy hurricane season last year and it’s expected to be more active again this year than average after last year’s record. We’re expecting 17 named storms and eight hurricanes versus 14 named storms for the average and seven hurricanes. Colorado State University is forecasting a 70% likelihood of a major hurricane hitting landfall in the U.S. when it’s normally about 50/50 likelihood.”

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