![]() And finally, there is the elasticity of demand, as a $10 a barrel lower oil price could raise oil consumption by 2.5-3.5 million b/d. More broadly, a weaker oil price framework will insulate oil demand from competitive threats, including a drive for efficiency improvements. Additionally, weaker oil prices make electric vehicles (EVs) less competitive than internal combustion engine vehicles and will slow their penetration relative to the pre-COVID forecast. Partly offsetting these negative impacts, are the following: There could be an aversion to public transportation in favor of personal vehicles if fears of virus transmission persist. The recession also raised inequality, with a shift of part of the middle class into poverty, which has triggered a drop in demand on its own, perhaps as high as 400,000 b/d. Many businesses have made working from home arrangements permanent to reduce real estate needs and costs, and have signaled that business travel will be reduced for the foreseeable future as well. For demand, individuals and businesses forced to reduce travel during lockdowns have identified potential long-lasting cost savings that will both blunt the recovery in consumption and reduce long-term demand. While the global oil market will rebound considerably as the world economy recovers and lockdowns ease, the disruptions to both global oil demand and supply will persist far after the pandemic has ended, with considerable implications for the energy transition. Not all adjustments to demand will be negative Producers inside and outside of OPEC+, facing their second crisis in five years, responded by slashing capex, costs, and shareholder returns. ![]() After initial disagreement and delay, OPEC+ implemented decisive cuts, which allowed the market to start rebalancing and restored some confidence, although maintaining discipline may not be easy for the cartel. The unprecedented cut to demand was met with an unprecedented cut to supply. We expect about 75% or 6.3 million b/d of demand to come back in 2021. We expect global oil demand for 2020 as a whole to decline by 8.1 million b/d, wiping out six years of growth. The unprecedented collapse in worldwide mobility as a result of lockdowns and travel restrictions in March and April 2020 slashed oil demand by over 20 million b/d, or 20% of total demand. Petroleum’s pre-eminence as a land, air, and marine transport fuel is seeing oil consumption drop the most of all primary energy sources amid the global economic downturn that started this year. Therefore, what follows are the sole views of S&P Global Platts, subject to its citation policy, available upon request. One Of The Biggest Disrupters Since Birth Of The Oil Industry This is a market view by Dan Klein, Head of Scenario Planning Analytics, and Mark Mozur, Lead Analyst, Demand Modeling, of S&P Global Platts Analytics. S&P Global Ratings and S&P Global Platts are divisions of S&P Global. The oil majors, which have the size and financial power to do so, might decide to develop renewables that would offer them options for adapting to changing energy scenarios, build different power assets, or gradually consolidate.Įditor's Note: This report on the Energy Transition, published by S&P Global Ratings and S&P Global Platts Analytics, is a thought leadership report that neither addresses views about ratings nor is a rating action. Together with added COVID-19 concerns regarding ESG risks, weaker forecasts for oil demand are forcing oil companies to reassess investments and policies. For oil demand to peak by 2025, drastic changes would need to occur to business and consumer behavior, including near full adoption of working from home, reshoring of supply chains, and widespread electrification of road transportation. The weaker oil demand therefore is not meaningful enough to substantively bring forward the timing of the peak in oil demand that S&P Global Platts Analytics projects for the late 2030s. ![]() However, some adjustments to the demand outlook were positive as weaker oil prices make electric vehicles less competitive, reduce the drive for efficiency, and stimulate underlying oil consumption. COVID-19's impact on the global economy and consumer behaviors has reduced long-term world oil demand by 2.5 million barrels per day, according to S&P Global Platts Analytics Future Energy Outlooks.
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