• 4 minutes Europeans and Americans are beginning to see the results of depending on renewables.
  • 7 minutes Is China Rising or Falling? Has it Enraged the World and Lost its Way? How is their Economy Doing?
  • 13 minutes NordStream2
  • 4 hours Monday 9/13 - "High Natural Gas Prices Today Will Send U.S. Production Soaring Next Year" by Irina Slav
  • 2 hours California to ban gasoline for lawn mowers, chain saws, leaf blowers, off road equipment, etc.
  • 4 hours "Here is The Hidden $150 Trillion Agenda Behind The "Crusade" Against Climate Change" - Zero Hedge re: Bank of America REPORT
  • 5 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 3 days "A Very Predictable Global Energy Crisis" by Irina Slav --- MUST READ
  • 18 hours U.S. : Employers Can Buy Retirement Security for $2.64 an Hour
  • 23 hours Nord Stream - US/German consultations
  • 3 days An Indian Opinion on What is Going on in China
  • 3 days Can Technology Keep Coal Plants Alive and Well?
  • 4 days Succession Planning in Human Resources for Vaccinated Individuals in the Oil & Gas Industry
  • 6 hours Forecasts for Natural Gas
  • 16 hours Australia sues Neoen for lack of power from its Tesla battery
  • 3 days Storage of gas cylinders
  • 4 days Two Good and Plausible Ideas about Saving Water and Redirecting it to Where it is Needed.
Why $80 Oil Won't Destroy Demand

Why $80 Oil Won't Destroy Demand

Global oil demand is recovering…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

Aviation Crisis Could Cause Lasting Damage To Oil Markets

Last Friday, Warren Buffett served a new blow to an already troubled industry, shaking it to the core: The celebrity investor announced that Berkshire Hathaway had sold all its holdings in airlines.  The move sent ripples through the oil industry, as well.

The coronavirus pandemic had changed the world, Buffett said. It has also changed the air transport industry--and the changes may be lasting. 

As one of the most significant sources of oil demand, air transport is intimately linked to the oil industry. This means any lasting changes to one would inevitably lead to lasting changes in the other.

"I don't know whether two or three years from now that as many people will fly as many passenger miles as they did last year," Buffett said during a virtual shareholders' meeting. "They may and they may not, but the future is much less clear to me about how the business will turn out through absolutely no fault of the airlines themselves."

When the man known as the Oracle of Omaha doesn't know what the future holds to an extent to make an investment mistake, things must be really bad. Indeed, they are: jet fuel was the oil derivative that has registered the greatest demand plunge so far this year, according to the International Energy Agency. Over the full year, it is likely to book a 33.6-percent total decline, equal to about 2.4 million bpd, according to Rystad Energy. There is talk about peak oil demand resulting from the pandemic.

Peak oil demand has replaced peak oil supply as the doomsday scenario for oil in recent years thanks to a drive to replace fossil fuels with renewable energy sources to reduce humankind's catastrophic carbon footprint. This drive is still on, despite the pandemic. In fact, the European Parliament has sprouted a "Green recovery alliance" that will seek to make sure that crisis recovery will be tied to environmental targets.

"The COVID-19 has not made the climate crisis go away. The public money that states and Europe will spend to reinvest in the economy must be consistent with the Green Deal," French MEP Pascal Canfin, who initiated the alliance, said

The International Monetary Fund has also sounded a cautionary note against a total return to business as usual, overlooking environmental ambitions.

Related: 3 Ways To Play The Oil Price Bounce

"Taking measures now to fight the climate crisis is not just a 'nice-to-have'. It is a 'must-have' if we are to leave a better world for our children," IMF's chief Kristalina Georgieva told the Petersberg Climate Dialogue last week. "What we do now will not only reshape our economies and societies; it will also reshape humanity's future on this planet," she said. "A 'green recovery' is our bridge to a more resilient future."

So, theoretically, this would mean more money for renewables and more motivation for legislation and other measures seeking to curb people's hunger for oil products. This will come while the oil industry—both upstream and downstream—is reeling from the blow from the coronavirus, with even Exxon posting its first quarterly loss in decades.

Companies are slashing billions in spending, and they are shutting in wells: a risky business because sometimes a shut-in well cannot be brought back to life. Some have filed for bankruptcy, and more are preparing to do just that. Oil nations such as Russia and Saudi Arabia are bracing for budget revenue blows, and virtually everyone is cutting oil production.

Normally, this would eventually lead to a shortage. However, as suggested by current trends, the situation is as far from normal as it can be. U.S. shale companies will not be the only ones to start falling like dominoes. Many airlines are hanging by a thread, and even the top players in the air industry--including Boeing, Airbus, and British Airways--are feeling the pinch.

It's a painful one: Boeing said it would be cutting 10 percent of its workforce after seeing a considerable loss in the first quarter. Airbus is also cutting jobs and warning its remaining workforce that it may not survive as it was, "bleeding cash at an unprecedented speed." British Airways said it would cut as many as 12,000 jobs. Four airlines have already gone under and this is just the beginning. According to industry bodies, as much as 85 percent of the world's airline could be bankrupt by the end of the year.

Now picture this: within a year, air travel could become a luxury few can afford, the way it was decades ago. Some believe it would take the air travel industry three years to return to pre-crisis performance, so this means no truly lasting damage. However, uncertainty remains a keyword. Nobody really knows how things will turn out. If air travel changes for good, the oil industry will change for good, as well, helped by the generous efforts of pro-green governments and international organizations. We may indeed witness the end of oil demand growth.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News