OPEC is trying to come to terms with the idea that the coronavirus crisis may have brought with it permanent changes in consumer behavior, stifling oil demand over the next two decades in stark contrast to the demand that the cartel had expected just a year ago.
Some officials at OPEC are admitting the possibility – unthinkable until just six months ago – that global oil demand may not recover to the pre-pandemic levels, ever, OPEC officials and industry sources close to the cartel told Reuters’ Alex Lawler.
In the wake of the demand destruction in the pandemic, OPEC now faces a new long-term conundrum on top of its short-term mission to manage oil supply during the crisis. This new problem for the cartel is how to make the most of its oil and get the most revenues for it in a world in which oil demand growth could be much slower than anticipated, or zero.
A key concern at OPEC is whether the COVID-19 crisis has significantly accelerated the timeline of peak oil demand, or whether we are already past that peak, according to OPEC officials and sources close to OPEC who spoke to Reuters.
Some of the top executives in the industry, including Shell and BP’s CEOs, are not committing to predictions, but they admitted earlier this year that we don’t know what lies beyond this crisis. They also admit that oil demand might have peaked.
“[E]nergy demand and certainly mobility demand will be lower even when this crisis more or less [is] behind us. Will it mean that it will never recover? It’s probably too early to say. But it will have a permanent knock for years,” Shell’s chief executive Ben van Beurden told IHS Markit Vice Chairman Daniel Yergin in an interview earlier this month.
BP’s chief executive Bernard Looney is not ruling out either that the oil demand crash and perhaps the subsequent lasting change in people’s lifestyle may have already brought about peak oil demand.
OPEC, as usual, is not publicly expressing any worries about ‘peak oil demand.’ Yet, if there is a lasting change in demand patterns after the crisis, the cartel and its members – many of which rely heavily on oil revenues for budget income – may be in for many behind-closed-doors meetings and brainstorming sessions about what to do next.
By Tsvetana Paraskova for Oilprice.com
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