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Page added on June 1, 2021

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The pandemic has proved peak oil demand wrong

The pandemic has proved peak oil demand wrong thumbnail

While the world is not yet back to pre-pandemic travel levels and there is still ongoing disruption to ground transportation and air traffic, the world now consumes more than 95 million barrels of oil per day (bpd) and is forecast to reach an average of 97.7 million bpd during 2021, according to the latest US Energy Information Administration (EIA) outlook.

The agitated global oil market has survived because of the large cuts by OPEC+, as the group unanimously worked to balance the market following the largest oil demand shock in history, huge oversupply and the accumulation of stock.

OPEC+ was the dominant player in the 2020 oil supply-demand balance and it will continue to be in 2021, with the presumed recovery in global gross domestic product (GDP) resulting in an acceleration of growth in the second half of this year.

What could have happened if OPEC didn’t exist during the COVID-19 crisis? The pandemic hampered mobility and trade last year and, to a lesser extent, this year as its impact is not over yet. Some argue that it will continue in the months and years ahead, since more than 60 percent of oil is used for transportation.

The pandemic outbreak has shocked global oil demand and rocked other commodities as well, bringing the peak oil demand theory back to the surface again, although it has been extremely difficult to give an accurate outlook for oil demand.

How did the pandemic change oil demand outlook? Will the world after lockdown consume less oil? Has oil demand really peaked? Will the next challenge for energy markets be a shift from a glut of oil to a severe shortage, as a result of the huge decrease in oil upstream investment? All these questions have been raised after the pandemic outbreak and are yet to be answered convincingly.

Apparently, the pandemic has reshaped the energy market to be even more unpredictable than it was already. Hence, oil prices cannot be foreseen, even if fundamentals will continue to matter more than they ever have, requiring a steady and holistic perspective across global markets.

The ongoing vaccination emergence has created a wave of optimism across global markets, leading to an upward revision for 2021 oil demand.

As per OPEC’s outlook, oil demand will rebound by more than 6 million bpd in 2021 and, even if consumption is still expected to be more than 2 million bpd below 2019 levels of around 100 million bpd, this is a huge recovery from 2020 levels.

The EIA estimates that the world consumed 96 million bpd of petroleum and liquid fuels in March, which is an increase of 4.7 million bpd from the same period last year.

It also forecast that global consumption of petroleum and liquid fuels would average 97.7 million bpd for all of 2021, which is up by 5.5 million bpd from 2020.

This means that, by the end of 2021 and early 2022, oil demand might outstrip 2019 levels and at that time the world might start feeling a gradual upcoming shortage of supplies if OPEC+ doesn’t temper its 5.8 million bpd output cuts.

Concisely, if peak oil demand was a controversial theory before the pandemic, it has become an unrealistic and illogical theory after the pandemic.

The pandemic, it seems, has successfully eliminated the peak oil demand theory, even if the oil demand outlook continues to be unpredictable.

arabnews



7 Comments on "The pandemic has proved peak oil demand wrong"

  1. Outcast_Searcher on Wed, 2nd Jun 2021 10:38 am 

    So far EV’s have replaced only a few percent of ICE vehicle demand. When that becomes more like 30% or 50%, peak oil demand globally will be likely.

    Just because something hasn’t happened in the very early stages of a transition does NOT mean it will never happen.

    And of course, that does NOT mean significant demand for crude oil won’t persist globally, at least for quite a few decades.

    Between things like petrochemicals and asphalt, given the global economic growth (as people in the third world move into the middle class, for example), there will be LOTS of increased oil demand in some categories.

    The green dreams/claims that crude oil production will go away in a few years or even decades are nonsense — even IF all planes can become electric, for example.

  2. makati1 on Wed, 2nd Jun 2021 5:11 pm 

    “The green dreams/claims that crude oil production will go away in a few years or even decades are nonsense…”

    Absolutely correct Outcast. Only those who have zero knowledge of any place outside their neighborhood could believe the greeny bullshit. The developing world is going to grow their oil and NG usage for decades to come. There is still plenty of oil, at reasonable prices, being tapped all over the world. That is the cause of most problems now. The South China Sea. The Eastern Mediterranean Sea. The Arctic, etc.

    The 1,000,000,000 Westerners may buy less, but the 7,000,000,000 others will buy more. The oil is not going away. It is just moving East with the power. Here in the Philippines, a laborer makes ~$7 PER DAY. A gallon of gas costs ~$5. Yet Manila, a city 8 miles wide and 15 mile long, is traffic jammed every day. The world moves by billions of FF vehicles. A hundred million plus, new every year. Not going to change for a long time, I think.

    Example:

    A gallon of gas in 1962, my first car, was about $0.30 ($3/hr income then)
    Using the inflation calculator, that same gallon would cost $3.09 now.
    (Equal income = ~$26.50/hr, My last income.)

    It’s ALL relative! Put things in perspective for a real view of the world.

  3. Duncan Idaho on Wed, 2nd Jun 2021 6:39 pm 

    Best reason for wearing a mask?

    “I don’t want to be mistaken for a Republican”

  4. Cloggie on Thu, 3rd Jun 2021 2:28 am 

    “The green dreams/claims that crude oil production will go away in a few years or even decades are nonsense…”

    Absolutely correct Outcast. Only those who have zero knowledge of any place outside their neighborhood could believe the greeny bullshit. The developing world is going to grow their oil and NG usage for decades to come. There is still plenty of oil, at reasonable prices, being tapped all over the world. That is the cause of most problems now. The South China Sea. The Eastern Mediterranean Sea. The Arctic, etc.

    Peculiar position for somebody frequenting a site called “peakoil”.

    Richard Heinberg may have been wrong with his peakoil 2010 and has gone very quiet lately.

    But sooner or later it is going to happen anyway. Rystad Energy (Norwegian) says it could be 2026:

    https://deepresource.wordpress.com/2021/05/21/peak-oil-2026/

    Others, like the IEA, think it will happen a few years later. And yes, there will be for decades oil and gas left, but ever less so, against ever higher prices. And all the time renewable energy, already the cheapest source of energy, will get cheaper and cheaper and replacing oil and gas, also in the Third World.

    I think peak oil demand will happen before this decade is over. The Paris Accords and carbon tax will ensure that.

  5. Duncan Idaho on Thu, 3rd Jun 2021 3:10 pm 

    “DeJoy is corrupt to the core”
    He is a repug appointed by the Fat Boy—
    Par for the course.
    https://www.commondreams.org/news/2021/06/03/fbi-reportedly-investigating-dejoy-house-democrat-says-he-should-be-fired-now

  6. Cloggie on Fri, 4th Jun 2021 12:38 pm 

    Vladimir Putin has just announced that one of the two legs of Nord Stream 2 has been completed and that natural gas will pumped through it immediately:

    https://deepresource.wordpress.com/2021/06/04/first-stretch-nord-stream-2-completed/

    The second leg will be completed within two months time.

    Putin won.

    Again.

    Sorry Donnie, Joe.

  7. Dredd on Sat, 5th Jun 2021 9:25 am 

    If oil is made by viruses, does that impact upon its legitimacy (On The Origin of the Genes of Viruses – 16)?

    IOW is there more ‘pan’ than ‘demic’ ?

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