The COVID-19 pandemic has been particularly tough on the oil industry, and it appears as though the impacts will be felt well beyond the immediate future. According to BloombergNEF, peak fuel demand will come sooner than previously predicted, with gasoline demand peaking in 2030 and on road diesel demand peaking shortly after in 2033. While there are other factors in play, COVID-19 certainly appears to be expediting the process.
In 2019, on road transport was responsible for 40% of global oil demand. COVID-19 ravel restrictions and lock downs have erased essentially a decade’s worth of growth in only a few short months. A bounce back in commercial truck diesel demand is expected over the next couple of years, but it’s entirely possible that oil demand for passenger cars peaked in 2019. Many companies have their employees working from home during the pandemic, and a significant portion of those employees will likely never return to a full-time in office setting. BloombergNEF points out additional factors of tightening fuel economy regulations, the emergence of electric and hydrogen fuel cell vehicles, as well as the growing popularity of ride-share services like Uber and Lyft as major disruptors to future on road fuel demand. BP adds that more energy efficient vehicles, whether they be rail, marine, aviation or road, also are adding to the sooner than expected peak demand.
As challenges continuing mounting for the global oil industry, the International Energy Agency (IEA) views this as a “once-in-a-lifetime opportunity” to pour investment into clean energy and create millions of jobs. This type of global plan would require significant spending by governments that are already facing monumental monetary issues, but it will be interesting to see if they’re willing to take on the potentially game-changing investments as well as what the returns will be over the next couple of decades.