Abstract
The objective of this chapter was to structurally model the high priority factors in the face of the impact of severe acute respiratory syndrome COVID-19 on the energy market. The method was based on interpretive structural modeling, and the matrix of crossed impacts multiplication was applied to classification. A model of 12 factors structured hierarchically in six levels is proposed in which consumption preferences, regulatory and normative modifications, political restrictions, and planning strategies have the greatest influence on the energy market from the perspective of China. As a result of this, it is suggested to move towards greater participation of public and private actors in renewable energy vectors.
TopIntroduction
Wuhan (China) was the epicenter of the virus identified as severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) and the associated infectious disease 2019 (novel coronavirus, COVID-19). The first case was reported on 31 December 2019. On 11 March 2020, the rapid spread of the virus in 114 countries led the World Health Organization (WHO, 2020) to declare it a pandemic and the vulnerabilities of health systems and national economies. Given this, the energy market was no exception, and the persistence of universal non-pharmacological interventions (NPIs), such as voluntary home isolation of people, in addition to low economic activity, triggered a drop in demand. Energy mix, especially some of the most commercialized hydrocarbon-based products, and interruptions in the energy supply chain (International Finance Corporation, 2020). This led to an operational paralysis of different industrial sectors (European Parliament, 2020), and the high dependence that society still has on this type of fuel to function was evidenced (BP, 2020).
Even when pre-COVID-19 oil and gas prices approached record lows due to the economic slowdown in China and record gas production in the United States (BP, 2020), slower growth in demand triggered by COVID-19 is likely to keep oil prices low, although volatility and financial stress in the market can be expected on the way to economic recovery, at least to pre-pandemic levels. However, this sector presents a different reality for each country, particular characteristics that nevertheless maintain inseparable links with changes that have occurred at the international level (Gillingham, Knittel, Li, Ovaere and Reguant, 2020); although it is not possible to know the temporality and all the effects produced by the pandemic in the energy sector.
To think that the impact of SARS-CoV-2 is temporary and that the world will continue inertially with its development is, to say the least, a simplistic view. Countries and their societies will be very different, and energy is one of the cornerstones that will determine the speed, depth, and scope of that transition. In some perspectives, it is argued that the COVID-19 pandemic has marked the end of the era of coal and fossil fuels, to give way to the formulation of public policies aimed at accelerating the process of decarbonization of the energy market and promoting the growth of green energy (Kuzemko et al., 2020). Still, the energy market’s future is far from certain, and the impacts of this disruption will imply processes of deep reflection and debate regarding the decisions that must be considered globally as part of international commitments.
In the specialized literature, models for making decisions in situations of high complexity and uncertainty have been documented in various fields of knowledge, among which are those of structured analysis, namely, interpretive structural modeling (ISM) and the matrix of crossed impacts-multiplication applied to a classification (MICMAC) (Keenan and Popper, 2008; Popper, 2009; Popper and Teichler, 2011). Based on the preceding, the research question is: What are the high priority factors based on SARS-CoV-2 and their interrelation in the energy market’s future? To respond to this, the objective of the research was to structurally model the priority factors for the future of the energy market. The document was structured in five parts. After the introduction, the theoretical framework on the ISM and MICMAC is included from the perspective of the energy market; the third section describes the research method; in the fourth, the ISM and the strategies that will be considered by the actors involved in the energy market are proposed; and, finally, the last section presents the conclusions.
Key Terms in this Chapter
COVID-19 and Environment: The worldwide disruption caused by the pandemic has resulted in numerous positive effects on the environment and climate. The global reduction in modern human activity, such as the considerable decline in planned travel, was coined andropause and has caused a large drop in air pollution and water pollution in many regions. In China, lockdowns and other measures resulted in a 25 percent reduction in carbon emissions and a 50 percent reduction in nitrogen oxides emissions, which one Earth systems scientist estimated may have saved at least 77,000 lives over two months. Other positive effects on the environment include governance-system-controlled investments towards a sustainable energy transition and other goals related to environmental protection, such as the European Union’s seven-year €1 trillion budget proposal and €750 billion recovery plan “Next Generation EU” which seeks to reserve 25% of EU spending for climate-friendly expenditure. However, the pandemic has also covered illegal activities such as deforestation of the Amazon rainforest and increased poaching in Africa. The hindering of environmental diplomacy efforts combined with late capitalism also created economic fallout that some predict will slow investment in green energy technologies.
COVID-19 and Lifestyle: The pandemic has resulted in many people adapting to massive changes in life, from increased internet commerce to the job market. Social distancing has caused increased sales from large e-commerce companies such as Amazon, Alibaba, and Coupang. Online retailers in the US posted 791.70 billion dollars in sales in 2020, increasing 32.4% from 598.02 billion dollars from the year before. The trend of home delivery orders has increased due to the pandemic, with indoor dining restaurants shutting down due to lockdown orders or low sales. Hackers and cybercriminals/scammers have started targeting people due to the massive changes, with some pretending to be part of the CDC and others using different phishing schemes. Education worldwide has increasingly shifted from physical attendance to video conferencing apps such as Zoom as lockdown measures have resulted in schools being forced to shut down. Due to the pandemic, mass layoffs have occurred in the airline, travel, hospitality, and some other industries. (There were no signs of permanent recovery as of May 2021).
COVID-19 and Economics: The outbreak is a major destabilizing threat to the global economy. One estimate from an expert at Washington University in St. Louis gave a $300+ billion impact on the world’s supply chain that could last up to two years. Global stock markets fell on 24 February due to a significant rise in COVID-19 cases outside China. On 27 February, due to mounting worries about the COVID-19 outbreak, US stock indexes posted their sharpest falls since 2008, with the Dow falling 1,191 points (the largest one-day drop since the financial crisis of 2007–08) and all three major indexes ending the week down more than 10 per cent. On 28 February, Scope Ratings GmbH affirmed China’s sovereign credit rating but maintained a Negative Outlook. Stocks plunged again due to coronavirus fears, the largest fall being on 16 March.
Multiple-Criteria Decision Making (MCDM): Multiple-criteria decision analysis (MCDA) is a sub-discipline of operations research that explicitly evaluates multiple conflicting criteria in decision making (both in daily life and in settings such as business, government, and medicine). Conflicting criteria are typical in evaluating options: cost or price is usually one of the main criteria, and some measure of quality is typically another criterion, easily in conflict with the cost. In purchasing a car, cost, comfort, safety, and fuel economy maybe some of the main criteria we consider – unusually, the cheapest car is the most comfortable and the safest one. In portfolio management, managers are interested in getting high returns while simultaneously reducing risks; however, the stocks that can bring high returns typically carry a high risk of losing money. In a service industry, customer satisfaction and the cost of providing service are fundamental conflicting criteria.
COVID-19: Coronavirus disease (COVID-19) is an infectious disease caused by a newly discovered coronavirus. Most people who fall sick with COVID-19 will experience mild to moderate symptoms and recover without special treatment. The virus that causes COVID-19 is mainly transmitted through droplets generated when an infected person coughs, sneezes, or exhales. These droplets are too heavy to hang in the air and quickly fall on floors or surfaces. You can be infected by breathing in the virus if you are within proximity of someone who has COVID-19 or by touching a contaminated surface and then your eyes, nose, or mouth.
Decision Analysis (DA): Is the discipline comprising the philosophy, methodology, and professional practice necessary to address important decisions formally. Decision analysis includes many procedures, methods, and tools for identifying, clearly representing, and formally assessing important aspects of a decision; for prescribing a recommended course of action by applying the maximum expected-utility axiom to a well-formed representation of the decision; and for translating the formal representation of a decision and its corresponding recommendation into insight for the decision-maker, and other corporate and non-corporate stakeholders.