Did Global Oil Demand Peak in 2019?

The COVID-19 pandemic has sent shockwaves through the oil and gas industry, with some analysts warning the outbreak may have triggered an early peak in demand. According to Norway-based energy consultancy DNV GL, both global oil demand and carbon dioxide emissions likely climaxed in 2019 and will not exceed these levels moving forward.

As a result of the worldwide outbreak, DNV GL analysts say global energy consumption will be 8% lower in 2050 than originally predicted. They say the slump will be largely influenced by the pandemic, which has crippled the international air travel industry and forced economies around the world to shut down in the face of nationwide and regional lockdowns.

“Lasting behavioural changes to travel, commuting and working habits will also decrease energy usage and lessen demand for fossil fuels from the transport sector as well as from iron and steel production,” reads a statement issued by DNV GL. The statement refers to research exploring the effect of the COVID-19 pandemic on both global energy demand and carbon dioxide emissions.

Air travel collapse at heart of demand slump

The prediction builds on warnings issued by the International Energy Agency (IEA) which predict oil demand won’t recover to pre-coronavirus levels until 2022. The gloomy forecast is largely driven by the sharp decline in air travel, with international travel restrictions forcing many airlines to slash routes. A recent research note published by Goldman Sachs agrees, predicting oil demand will “rebound” in 2021 and “fully recover” by 2022. DNV GL isn’t quite as buoyant, saying there’s a strong chance oil demand may never bounce back.

“While we expect oil demand to recover next year, we think that it’s likely that it will never reach the levels seen in 2019,” warns Sverre Alvik, head of Energy Transition Outlook at DNV GL.

Majors forced to revalue assets

The impact of the pandemic has been severe, with scepticism surrounding the health of long-term global oil demand forcing oil majors to revalue assets. Shell took one of the biggest hits, wiping up to US$22 billion off the value of its asset portfolio in the face of the turbulent energy outlook.

A new era for renewables

For Alvik, the silver lining could be a pivot towards renewable energy. “COVID-19 has shown that behavioural changes are indeed possible, and we can use this opportunity to make a change which is good for (the) climate,” he says.

Want to know more about how the oil and gas industry is working towards a cleaner future? ‘An international standard for CO2 purity could support safe and efficient CCS operations’ spotlights the concept of Carbon Capture and Storage (CCS) and its potential to slow climate change.