• S&P Global Platts projects global oil demand may be higher in 2021 than it was in 2019.
• The petrochemical sector is expected to take a larger share of global demand in the future, while the transportation sector will take less.
• IEA isn't so sure about the demise of the oil industry, as many environmentalists and special interest groups suggest in a post-coronavirus world.
Travel restrictions and lockdowns resulting from the COVID-19 pandemic have left many wondering about the future of global oil consumption.
Will the world’s historically proven, insatiable thirst for oil ever fully recover to pre-pandemic levels, or fulfill prior growth projections made by organizations like the International Energy Agency (IEA)?
A recent analysis by S&P Global Platts Analytics sheds new light on the topic. It found that while oil demand in the transportation sector is projected to be down through to 2040, strong growth in the petrochemicals sector suggests that it could still be a few decades before we see peak oil demand.
S&P also predicts oil demand is expected to remain below pre-pandemic levels at 94.2 million b/d in 2020 before potentially growing to a record high of more than 101 million b/d in 2021 in its report.
Transportation Down, Petrochemicals Up
Putting global demand into perspective is crucial in a world where people are travelling less but using more equipment and technologies made using oil.
Today, jet and marine fuels account for about 8% and 6% of global crude oil demand. The petrochemicals sector - responsible for making materials such as plexiglass, cell phones, and in many instances PPE like ventilator masks and hand sanitizers - is now cutting out a bigger share, accounting for about 19% of that demand.
The Case of Coal
Even the IEA is somewhat skeptical of those who believe coronavirus has brought about the ultimate demise of the oil industry. In early July its Executive Director Fatih Birol said:
“If oil demand goes back to 100 million b/d I would not be surprised. And under a strong recovery, I would not be surprised if it went higher than that.”
Fatih seems to be likely aware of the case of coal, a fossil fuel that many nations now shun because of low efficiencies and high emissions compared to other forms of generation but remains in use in some of the world’s largest, most rapidly developing nations.
Coal is an integral part of the economies of India and China, with more than half of the world’s coal power plants located in these two countries. Use of thermal coal in power plants and in steel manufacturing remain strong, as does the global coal trade.
China and India have also been the two largest leaders in driving growth of global oil demand. The IEA’s Oil Market Report 2019 found that the two countries will account for roughly 44% of the 7.1 million barrels per day growth of demand expected through to 2024.
The question remains: will China and India lead the world in global oil demand growth as they did pre-coronavirus? It seems likely. Bloomberg has reported recently that China’s oil demand recovery is complete, while India’s is expected to return to pre-pandemic levels by the end of 2020.
Projecting Future Oil Demand Isn’t So Simple
Life after the coronavirus pandemic may or may not be the same. For every claim that travel restrictions will reduce in-person shopping, hamper air travel and decrease commuting, a counter-claim exists that people will drive their cars instead of public transit and be less inclined to buy electric vehicles due to low gas prices.
Fatih Birol once again shares his realist outlook on future demand:
“Some say demand for oil is falling because we are changing our lifestyles, I’m not so sure,” said Birol. “Teleworking alone is not going to send oil demand lower. We need the right policies.”
Both the IEA and IMF have called for $1 trillion stimulus package to stimulate national economies while also incorporating the transition to cleaner and more resilient energy systems as part of a pandemic recovery plan. However, it is yet to be seen if governments can deliver on a cleaner energy future, especially those who rely heavily on the and revenues generated by their fossil fuel industries to support clean tech and innovation and their national economies.
Canada Should Be a Choice Supplier
Canada is the fourth largest producer and exporter of crude oil in the world. Canadian oil and gas producers are held to some of the highest regulatory standards on the planet. We consistently rank number one out of all top 10 global oil exporters on environmental, social and governance (ESG) related indexes.
As long as the world needs oil, which it will for decades to come, Canada should be a choice supplier. We are champions of equality, human rights, democracy and the environment, and the world needs to start recognizing us for such.
Join us at Canada Action on Facebook, Instagram and Twitter today, and begin taking part in a massive online community that supports natural resource development and the prosperity that comes with in Canada. Hope to see you there!
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