One of the biggest oil companies in the world, BP, is not ruling out that the oil demand crash amid COVID-19 and perhaps the subsequent lasting change in people's lifestyle may have already brought about peak oil demand.
The pandemic adds not only a layer of uncertainty in the oil industry in the short term, but it also creates another challenge for the coming years, BP's chief executive Bernard Looney told the Financial Times in an interview published on Tuesday.
"It's not going to make oil more in demand. It's gotten more likely [oil will] be less in demand," Looney told FT.
BP's top executive joins other CEOs of major oil corporations who have recently expressed views that it's not guaranteed that global oil demand will return to its 'normal' pre-virus levels of around 100 million barrels per day (bpd).
"I don't think we know how this is going to play out. I certainly don't know," Looney said. "Could it be peak oil? Possibly. Possibly. I would not write that off," BP's chief executive told FT.
Last month, Shell's chief executive Ben van Beurden said on the earnings call that the current crisis is a "crisis of uncertainty," and we don't know what's on the other side of it, as the supermajor slashed its dividend for the first time since World War II. Related: When Will The Next Oil Price Cycle Begin?
"We are looking at a major demand destruction that we don't even know that will come back. So the oil price may come back. But if the volumes are significantly lower, we still have a major dislocation, of course, in our own cash wheel," van Beurden said.
According to Shell, maybe we've already hit peak oil demand—a sobering view in stark contrast with opinions from just three months ago that suggested global oil demand would continue to grow every year for at least another decade.
The pandemic and the oil demand crash has made the case for BP investing more in renewables a "personal conviction" for Looney, he told FT.
Both BP and Shell, plus other oil majors, including Eni and most recently, Total, have pledged to become net-zero energy companies by 2050 or sooner.
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By Tsvetana Paraskova for Oilprice.com
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I think not oil demand but oil production has peaked globally. & from hereon, we will see lower production of oil compared to demand as oil prices going below zero is a biggest lesson for oil producers in world & shows that they may go bust, doom if even a little rise in production above demand levels happens in any time in future.
The world’s population of 7.8 billion were consuming in January this year 100 million barrels a day (mbd). The onset of the outbreak may have kept at least half of the world population in a global lockdown and quarantines thus cutting global oil demand by an estimated 50 mbd or 50%, hence the current destruction of the global oil demand. It has nothing whatsoever to do with peak oil demand. To underline my point, China’s crude oil imports in the first four months of 2020 averaged 10.11 mbd and were slightly higher than the same period of 2019.
Such claims have preceded the cutting of dividends by Shell for the first time since 1945 and it could also herald the cutting of dividends by BP following in the footsteps of both Shell and Equinor.
Still, Big Oil has a tendency to keep one foot in the environmental lobby by trying to burnish its environmental credentials through talking about zero-emissions by 2050 or speculating about peak oil demand and another foot in the oil lobby where their bread and butter are. Big Oil bends with the wind.
There will be no peak oil demand throughout the 21st century and far beyond.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
I couldn't have worded it better.