The COVID-19 pandemic and the acceleration of the energy transition are expected to have a lasting impact on global oil demand, expected to peak at 102 million barrels per day (bpd) in 2028, says Norwegian consultant Rystad Energy. Before Covid-19, it expected for peak oil demand of just over 106 million bpd in 2030.
The persistence of the Covid-19 pandemic is likely to cause 2020 oil demand to decline to 89.3 million bpd, compared to 99.6 million bpd in 2019. Demand will then recover to 94.8 million bpd in 2021 still capped by regional lockdowns and slow international aviation recovery as airlines continue to operate far below pre-virus levels.
In its Governmental Targets Scenario, Rystad sees oil demand then recovering to 98.4 million bpd in 2022, still stuck below pre-virus levels due to structural Covid-19 impacts. It is only in 2023 that demand will recover to pre-Covid-19 levels and jump back to 100.1 million bpd.
The slow recovery will permanently affect global oil demand levels, shaving at least 2.5 million bpd off our forecasts made before the coronavirus. We have lost at least 2 years of oil demand growth in 2020 and 2021, while before the virus we expected yearly growth of 1 million bpd. The lockdowns will stunt economic recovery in the short-term and in the long-term and the pandemic will also leave behind a legacy of behavioral changes that will also affect oil use,“
…explains Artyom Tchen, Senior Oil Markets Analyst at Rystad Energy.
Supplementing the effect of Covid-19 on oil demand, the energy transition is accelerating and also weighs on peak oil demand revision. All sectors contribute to the transition, but transport (60% of oil demand) will be the ultimate driver of this shift.
By 2025, the plug-in-hybrid and battery electric vehicles are expected to achieve 14% market share in new passenger vehicle sales, according to public governmental targets, then further grow to 80% by 2050.
Between 2025 and 2030, oil demand will enter a plateau phase at around 102 million bpd. In this phase, we no longer see any residual Covid-19 impacts.
We expect firm structural demand growth driven mostly by developing Asia and Africa, which will push demand up, and an increasing, yet weak substitution impact in the road transportation segment as well as a continued structural decline in the power, industry and buildings sectors, which will drive demand down. In this phase, we estimate that these effects will roughly net each other out.
The post-peak phase (2030 – 2050) is characterized by the acceleration in EV adoption and recycled plastics use, which will also spill over to developing countries and satisfy part of their energy demand.
Geographically, the demand growth until 2030 will be driven by Asia, led by China and India. Afterward, Rystad expects that the energy demand in developing countries will keep increasing, driven by GDP and population growth, but that it will be increasingly satisfied by alternative sources and new technologies in a decarbonization push.
Developing countries in Asia and Africa will see a sustained increase in oil demand through the end of the 2040s in our updated forecast as infrastructure hurdles and heavy discounts on imported used internal combustion engines will make it harder for new technologies to penetrate these regions, particularly in rural areas.
Overall, we do not believe Covid-19 has put peak oil demand behind us, but we do acknowledge the pandemic will greatly alter the peak oil demand reckoning moment, both in terms of timing and volumes. This will help oil substitution gain speed and inevitably take global consumption to lower levels quicker, hand in hand with the energy transition,
…Tchen concludes.
