Rising oil levels in temporary storage, Saudi crude oil price reductions, and a slowdown in Chinese imports: these were some of the factors that had pressurized oil prices recently. And the reason they suppressed prices was that they told the same story to everyone: demand is not improving as it should be. And it is also raising fears for long-term demand. Will Big Oil pay a stake on plastics? Will jet fuel demand ever return to pre-epidemic levels? Will you ask for petrol? The future of the oil industry rests on the answers to these questions. The coronovirus epidemic wasted millions of barrels in fuel demand as the countries were locked to prevent the spread of the disease. This demand is now returning as the lockdown ends, but it is not returning as quickly and as strongly as one might wish, signaling a bleak forecast. Yet US gasoline inventions have recorded some considerable deficiencies in the past three months — the driving season being the most active demand period for gasoline — and Chinese refiners are importing oil like there is no tomorrow. That picture is not so bleak. It will take more time to recover fuel demand.
Last month, in its regular monthly forecasts, the three largest energy authorities – the Energy Information Administration, the International Energy Agency, and OPEC – appeared for Agree with It will take at least 2022 to recover oil demand to pre-crisis levels. Some analysts argue that demand will never return to pre-crisis levels, and they may have a point, especially if vaccine development takes more than a few months – which it usually does – and the world. Very few flights start settling in the new normal, less overall travel, and less consumption.
Related: Super cycle ushered in a new oil market So, where is the future oil demand coming from? The short answer is, the same place that has come till now. It would hold a few million barrels daily, for some time, at least. Oil is not going anywhere, and the economy grinded by coronovirus will recover sooner or later. When they do, they will need more oil, and yes, that includes Europe, which has firmly stepped on the green path of renewable energy and electric cars. Also in Europe, the bulk of car sales are vehicles with internal combustion engines.
Transport fuels are a very large market for crude oil, and this market, though tarnishing the current outlook, is not going away. Nothing less than a mandatory switch to EV can destroy this market, and even the most progressive of governments have so far stopped short of making such a switch. So even though right now, fuel stocks are increasing as more gasoline and distillation are being used, there will be market imbalances in the future. People will either get accustomed to the new normal and refiners adjust their output, or a vaccine will be made available and we return to our old ways.
Even jet fuel demand is not an important reason. Air travel has been perhaps the hardest hit segment of the transportation industry amid the epidemic, but the outlook is for growth. recently Report good According to air travel membership forecasts, the global market will grow at an annualized annual growth rate of 3.4 percent by 2027. It may not be a double-digit boom, but it is steady growth, even though now almost all airlines are struggling, with some failing to survive the current recession.
Plastics and petrochemicals are another potential growth area. In fact, this is an area that the oil industry has been targeting as the main source of revenue in the future. recently Report good Carbon Tracker questioned the wisdom of this strategy, saying that demand for plastics is declining, which could leave stranded oil and gas assets at $ 400 billion. Carbon Tracker argues that Big Oil expects strong growth in demand for plastic, but this is not coming due to governments’ green axis and initiative to tackle plastic waste.
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Will this scenario be truly doubtful? For example, there have been several attempts to come up with cost-effective alternatives to plastics. Some of these have been successful and others are so few, but the fact remains that the world consumes tons of plastic despite the choice. The possibility is there until they remain the cheapest option – from an end-consumer point of view if not climate-protection ones – there will be a market for plastics, and not a small one.
Oil and gas — especially gas — are not going anywhere despite pushing green for electricity generation. Someday the world may be powered exclusively by renewable energy sources, but this day is far in the future if it ever comes. For the observable future, we will depend on fossil fuels.
The oil industry is not yet a happy place. This may well be a sad place for some time. Nevertheless, the world is still dependent on what she produces, whether we like it or not. The industry will certainly incur losses in both revenue and demand, but its primary demand sources will continue even in 2050, when many of the government’s net-zero plans are scheduled to be completed.
By Irina Slavin for Oilprice.com
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