The revolution in renewable energy, which many consider a threat to the oil and gas industry, can bring to this industry. This was announced for CNBC by the head of the department of natural resources research in the EMEA region Goldman Sachs.

“The desire for decarbonization, the desire of the market to adapt to climate change leads to such tightening of financial conditions in the sector that we recreate barriers to entry and restore the market structure that we lost in the early 2000s,” said Michele Della Vigna.

As barriers to entry increase, competition for Greater Oil becomes less and less, and there are more opportunities to maintain and increase profitability. In other words, the growth in the use of renewable energy sources has provided global producers with another competitive advantage over smaller oil and gas companies.

“We hear a lot of stories about long-term replacement of oil demand with electricity, but it will take a lot of time. Meanwhile, demand remains high, especially in emerging markets, which continue to buy a lot of oil. ” 
In fact, this is nothing new. China, India and other countries with developing economies are the main factors affecting the demand for oil.

So it seems that now we are seeing what Goldman analyst calls the “restoration of the oligopolistic market structure in the industry”. After the flurry of independents who made the so-called first shale revolution possible before the prices fell in 2014, now everything is back to square one.

And if this is not enough, here is some more good news for Big Oil: according to Della Vigny, the oil market will turn into a deficit in the next decade, reflecting a decline in investment in new production during a recession. Companies with large cash heaps will be those companies that will benefit from a tougher supply situation.

Read continuation in OilDrop!