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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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OPEC May Have To Adapt To Lower-For-Longer Oil Demand


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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  • Mamdouh Salameh on July 28 2020 said:
    It is an absolute fact that the global economy and civilization as we know and enjoy can’t exist without oil. The global economy runs on oil and will continue to do that throughout the 21st century and probably far beyond.

    To sustain a world population exceeding 8 billion, the global economy has no alternative but to grow. The other alternative is a collapse of the global economy, starvation and the demise of civilization. It follows that global demand for oil will continue to grow along with the global economy. Of course efficiency could enable the global economy to grow faster than global oil demand growth but there is a limit to how much efficiency could slow down the demand for oil.

    In view of the above, there will never be a peak oil demand well throughout the 21st century and far beyond. Furthermore, claims that the COVID-19 pandemic has accelerated the timeline of peak oil demand or whether we are already past that peak are not only flawed but also reflect a lack of knowledge of the economics of oil.

    Global oil demand will be back to pre-pandemic levels sometime during the 2021 depending on how fast major economies return to normality. China’s rebound is a lesson for the world to learn from.

    Within three months of exiting the lockdown, its crude oil imports have broken all previous records hitting 11.67 million barrels a day (mbd) in June and its economic recovery is projected to be back to pre-pandemic levels by the end of this year. In fact, China’s LNG imports in June at 5.79 million tons were 29% higher than a year ago according to Natural Gas World. The data refutes earlier reports suggesting that China’s LNG imports in June were down 7% on the year.

    This is what will happen with the global economy more or less once the US and other major economies are completely out of the lockdown.

    If oil prices haven’t so far reflected the rise in global oil demand, it is because they have to tackle a huge glut which is depleting slowly but surely. Initially we will see oil prices hitting $45-$50 a barrel during this half of the year and touching $60 in early 2021. However, prices aren’t going to stop there. They could hit $100 or higher during 2022/23 as a result of a supply deficit triggered by a huge decline in global investments in oil and gas projects as a result of the pandemic.

    Once prices start to surge, oil export revenues will be back to pre-pandemic levels. Diversification of the economies of the Arab Gulf economies will help make them less vulnerable to the volatility of oil prices. They can further enhance their oil export revenues by selling more than half of their crude as petrochemical and refined products. They can also accelerate this process by replacing a big chunk of oil and gas in electricity generation by solar electricity.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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