The Covid-19 crisis caused a historic decline in global oil demand
Global oil demand will return to pre-pandemic levels in two years and reach record heights by 2026 unless governments take swift action to meet climate goals, the International Energy Agency said on Wednesday.
Oil markets and the world economy are recovering from the massive collapse in demand caused by the coronavirus pandemic, the IEA said in an annual report.
“The Covid-19 crisis caused a historic decline in global oil demand, but not necessarily a lasting one,” IEA executive director Fatih Birol said in a statement.
As people get vaccinated and restrictions are lifted, demand will return to its 2019 level by 2023, according to the report.
The IEA’s five-year projections estimates global demand will rise each year to reach 104 million barrels a day (mb/d) by 2026, a gain of four percent from the level in 2019.
The outlook for demand, however, has shifted lower as the pandemic has forced changes in behaviour, with people working from home and travelling less, the report said.
More governments are also focusing on a potential “sustainable recovery” to move quickly towards a low-carbon future.
This raises the prospect of reaching a peak in oil demand sooner than expected “if governments follow through with strong policies to hasten the shift to clean energy,” according to the report.
“Achieving an orderly transition away from oil is essential to meet climate goals, but it will require major policy changes from governments as well as accelerated behavioural changes,” Birol said.
“Without that, global oil demand is set to increase every year between now and 2026,” he said. “For the world’s oil demand to peak anytime soon, significant action is needed immediately to improve fuel efficiency standards, boost electric vehicle sales and curb oil use in the power sector.”
Asia is expected to lead renewed growth in global demand and account for 90 percent of the increase from 2019 to 2026, according to the agency’s base scenario.
“By contrast, demand in many advanced economies, where vehicle ownership and oil use per capita are much higher, is not expected to return to pre-crisis levels,” the IEA said.
If fuel efficiency standards are improved, electric vehicle sales take off, the power sector uses less energy, people recycle and work from home more and business travel fails to pick up, the picture could change dramatically.
Taken together, it could reduce oil consumption by up to 5.6 mb/d by 2026, “which would mean that global oil demand never gets back to where it was before the pandemic.”
Birol said: “No oil and gas company will be unaffected by clean energy transitions, so every part of the industry needs to consider how to respond as momentum builds behind the world’s drive for net-zero emissions.”
Gasoline demand may never recover to pre-pandemic levels, the International Energy Agency (IEA) said on Wednesday, with increased use in developing countries offset by rising fuel efficiency and a switch to electric vehicles in wealthy nations.
In last year’s five-year outlook before the COVID-19 pandemic’s full force was felt in Western countries, the IEA said that gasoline demand was approaching a plateau and kept its demand outlook figure steady from 2024 to 2025.
However, remote working during the pandemic has helped to hollow out demand, the IEA said on Wednesday, and commuting is likely to remain curtailed in 2021 and in the coming years.
“Global gasoline consumption is unlikely to ever return to its 2019 level,” the IEA said on Wednesday in its Oil 2021 five-year outlook. “Strong growth in developing countries is no longer enough to offset declines within the OECD, where fuel efficiency improvements are making an impact.
“Consumption should continue to rise strongly in 2022 ... narrowing the gap with pre-pandemic levels. However, beyond that, gasoline demand is likely to stagnate for several years.”
Oil slipped for a fourth day on Wednesday as concerns about weaker demand in Europe outweighed an industry report that showed US crude inventories fell unexpectedly last week.
Several European countries have paused the use of AstraZeneca’s COVID-19 vaccine on worries over possible side effects. Germany is seeing rising coronavirus cases, Italy is imposing a nationwide Easter lockdown and France plans to impose tougher curbs.
Brent crude was down 38 cents, or 0.6%, at $68.01 a barrel by 1410 GMT, having pared earlier losses. U.S. West Texas Intermediate (WTI) crude dropped 35 cents, or 0.5%, to $64.45.
“The suspension will not do the bloc’s economic and fuel recovery any favours,” said Stephen Brennock of oil broker PVM. “The hope now is that Europe can get its sluggish vaccine rollout back on track.”
A World Health Organization (WHO) vaccine safety panel on Wednesday said the benefits of the AstraZeneca vaccine outweigh its risks and recommends that vaccinations continue.
Oil prices were also pressured by the latest reports from the International Energy Agency, which said a supercycle is unlikely and demand is not expected to return to pre-pandemic levels until 2023.