The oil market would suffer a long-lasting blow from the COVID-19 pandemic, with demand taking years to recover and peaking at a lower level, the International Energy Agency (IEA) said yesterday.
After an unprecedented 8 percent drop this year, global oil consumption would return to pre-pandemic levels in 2023, provided COVID-19 is brought under control next year, the Paris-based agency said.
Even in that case, which is the most optimistic scenario for oil considered by the IEA, the pandemic has an enduring impact.
The IEA reinforced its view that global oil demand would plateau in about 2030, topping out at lower levels than forecast last year.
“The era of global oil demand growth will come to an end in the next decade,” IEA executive director Fatih Birol said in the agency’s annual World Energy Outlook.
It is a stronger tone than last year’s report, which emphasized that there was “no definitive peak” on the horizon.
If the recovery from the pandemic is slower and there is lasting economic damage, oil demand might only have a couple of years left to grow, the IEA said.
The outlook from the agency, which advises most major economies, comes as oil majors, such as BP PLC and Royal Dutch Shell PLC, acknowledge that combination of the pandemic with and the drastic changes required to avert a climate crisis would have profound consequences for their assets and business models.
Long-term growth in oil demand would be tamed by the switch to more efficient or electric vehicles, the IEA forecast.
Consumption would increase by about 750,000 barrels a day each year to reach 103.2 million a day in 2030. That is about 2 million a day less than predicted in last year’s report.
The increase would be entirely concentrated in developing nations — most notably India — and dominated by feedstocks for plastics and other petrochemicals, rather than fuel for road transportation, the IEA said.
After 2030, annual growth would dwindle to just 100,000 barrels a day, it said.
If prolonged COVID-19 outbreaks impede the economic recovery, resulting in a global economy that is 10 percent smaller in 2030 than current projections, then the outlook for oil would be even more bleak.
Oil consumption would not recover to pre-virus levels until “the latter part of the 2020s” in this scenario, and would plateau shortly afterward at just under 100 million barrels a day, the agency said.
The outlooks from the IEA and international oil companies make the view of OPEC — which last week projected that oil demand would continue to grow for another two decades — an outlier.
The cartel also sees oil consumption recovering to pre-pandemic levels in 2022, a year earlier than the IEA.
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