The world hasn’t seen peak oil demand yet, the head of the International Energy Agency (IEA) told Bloomberg News on Monday, expecting that sooner or later, oil consumption would return to the pre-crisis levels and rise above that.
“In the absence of strong government policies, a sustained economic recovery and low oil prices are likely to take global oil demand back to where it was, and beyond,” Fatih Birol, Executive Director of the IEA, told Bloomberg.
Birol’s assessment of oil demand trends for after the COVID-19 pandemic and recession could sound reassuring to major oil-producing nations that depend on oil revenues for their budgets, as well as to oil majors, some of which have expressed uncertainty whether oil demand will ever return to the 2019 levels.
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 earlier this month.
"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.
According to IEA’s Birol, increased use of cars instead of public transport after the lockdowns and the depressed new passenger vehicle sales mean that oil demand for road transportation at least would recover faster than demand for other uses of oil.
By Tsvetana Paraskova for Oilprice.com
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The CEOs of ExxonMobil and Shell the world’s two biggest supermajors yesterday poured cold water on environmental activists’ arguments and made their positions on peak oil demand very clear. Darren Woods the chief executive of ExxonMobil demolished the environmental activists’ arguments when he declared that “the long-term fundamentals that drive our business have not changed." This was echoed by Shell’s CEO Ben Van Beurden who said that it is entirely legitimate to invest in oil and gas because the world demands it". "We have no choice."
And today, the International Energy Agency (IEA) and its Director seem to have seen the light at last by saying “the world hasn’t seen peak oil demand yet, expecting that sooner or later, oil consumption would return to the pre-coronavirus levels and rise above that”.
Furthermore, electric vehicles (EVs) will never prevail over internal combustion engines (ICEs). ICEs will continue to dominate the global transport system well into the future.
There you have it.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London