Energy and Mining

The energy and mining sectors have faced considerable risks and hurdles in recent years, some of which have been heightened by Covid-19.

A weak global economy leads to subdued demand for commodities and energy and never has this been more pertinent than in early 2020 when oil prices hit record lows. Amidst a worldwide demand slump and geopolitical tensions amongst key oil producers, Brent crude prices in April were down by over 70% compared to pre-crisis levels. Indeed, in such unprecedented circumstances, US oil prices even turned negative for the first time in history.  

Fears of an economic slowdown in China – one of the world’s major oil importers – have been prevalent amongst those in the energy and mining sector. Nevertheless, with the Chinese economy set to fare better than most in the aftermath of the coronavirus crisis, attention has seemingly shifted elsewhere. The economic damage suffered by other developing economies, such as Brazil and India, now looks more likely to contribute to weakness for energy and mining businesses.

Perhaps the main issue amongst businesses in the sector stems from a broader awareness of sustainability issues, causing shifting preferences away from traditional energy sources and towards renewables. Nevertheless, this represents a considerable opportunity to take advantage of changing consumer tastes. For instance, while output within the UK’s mining and quarrying industry has been falling since the turn of the millennium, the proportion of energy generation stemming from renewable sources has witnessed a firmly upward trajectory over that timeframe. Both of these factors align with greater awareness of environmental issues amongst consumers, firms, and other key stakeholders.

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