The International Energy Agency (IEA) predicts that average daily demand for oil will decrease by eight million barrels per day this year, down about eight percent from last year.
Although the agency expects an unprecedented rebound of 5.7 million barrels per day next year, it still predicts that aggregate demand will be lower than in 2019 due to lingering uncertainty in the sector air transport.
Some wonder if demand will ever return to 2019 levels.
“I don’t think we know how it will go. I certainly don’t know, “said BP’s new CEO Bernard Looney in May.
The COVID-19 pandemic was then in full swing with most of the planes grounded and white-collar workers abandoning the commute.
“Could it be a peak oil? Perhaps. I would not write that, “Looney told the Financial Times.SUM?
The peak oil concept has long generated speculation.
Most of the time, he focused on peak production, with experts predicting that prices would reach astronomical levels as the recoverable oil in the ground ran out.
But in recent months, the concept of peak demand has come into vogue, with the coronavirus picking up an uppercut in fuel demand for the transportation sector, followed by a punch from the transition to cleaner fuels.
Michael Bradshaw, professor at Warwick Business School, said environmental groups are already lobbying to prevent the Paris accords from becoming another victim of the pandemic, stressing the need for a Green New Deal for the recovery.
“If successful, demand for oil may never return to its peak level before COVID-19,” he said in comments to reporters.
The transportation sector may never fully recover, said Bradshaw.
“After the pandemic, we may have a different attitude towards international air travel or physical work,” he said.
Other experts say that we have not yet reached the tipping point, and perhaps not for a while.
“Many people have said, including some CEOs of some large companies, with the change in telework lifestyle and others, we may well see the demand for oil has peaked, and the demand for oil will decline “Said IEA Executive Director Fatih Birol recently.
“I don’t agree with that. Teleconferencing alone will not help us meet our energy and climate goals, they can only make a small dent, “added Firol when a recent IEA report was released.
Moez Ajmi, of consulting and auditing firm E&Y, dismissed as “science fiction” the idea that a definitive drop in demand for oil could suddenly emerge.
Demand is expected to recover slowly even if the coronavirus leaves the global economy weak.
This weakness would also likely slow the adoption of greener fuels.
“It will take time for fossil fuels, which still account for about 80% of global primary consumption, to face real competition” from rival energy sources, he said.
Meanwhile, the petroleum industry could face funding difficulties.
Bronwen Tucker, analyst at Oil Change International, says the industry is now under pressure from investors.
After “a fairly large wave of restrictions on coal and certain restrictions on oil and gas, the risks to investment in oil and gas are currently much greater,” she said.
The industry is already depreciating the value of assets to cope with the new market reality of falling demand and prices.
Royal Dutch Shell said last week that it would take a charge of US $ 22 billion as it reassesses the value of its business in light of the coronavirus.
Last month, rival BP reduced the value of its assets by $ 17.5 billion.
“This process must continue and we anticipate further significant losses in the industry,” said Angus Rodger, of energy consulting firm Wood Mackenzie.