World Oil Market: The Pandemics Will Bring Global Peak Oil Demand Closer

253
DOI: 10.20542/0131-2227-2020-64-9-26-36
I. Kopytin (kopytin@imemo.ru),
Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences, 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation

Abstract. The global economic crisis triggered in 2020 by the coronavirus pandemics necessitates more thorough analysis of the scholar concept of the global peak oil demand taking into account the newest data and facts. The present article articulates the thesis that under the influence of the process unleashed by the crisis and the pandemics the world economy will reach the peak demand for oil sooner than it was supposed earlier. The author highlights the two main contributing factors: first, changes in the behavior of mass consumers and producers; second, the acceleration of digitalization of business processes in corporate sector. Both factors lead to decrease in demand for transport mobility, specially in aviation and to a lesser extent in road transport. The unfolding restructuring of the established model of globalization, first of all trade wars and intensifying shifts in global value-added chains through reshoring and increasing emphasis on self-sufficiency and import substitution will also exercise downward pressure on oil demand globally. Basing on the analysis of shifts in energy and climate policies in the main world centers of production and consumption after the pandemics the conclusion is made that dynamic of future demand for oil crucially depends on the consistency of state policies supporting oil substitutes in transport sector and promotion of new energy sources. It is shown that European Union and China critically dependent on oil imports will continue to promote oil substitutes, primarily through encouraging road transport electrification. The USA richly endowed with hydrocarbons could temporarily slow down substitution of oil with alternative energy sources. The article concludes that the long-term tendency towards weakening of world economic growth upon oil consumption will accelerate.

Keywords: world oil market, peak oil demand, world economic crisis, coronavirus pandemics, road transport, aviation, consumer behavior, digitalization, European Union, China, USA


REFERENCES

1. Zhukov S.V., Reznikova O.B. OPEK v novoi konfiguratsii mirovoi neftedobychi [OPEC in the new configuration of world oil production]. God planety [The Year of the Planet]. (IMEMO) Moscow, Ideya-Press, 2016, pp. 31-41.

2. Zhukov S.V., Reznikova O.B. Soglashenie OPEK+: kon”yunkturnye zadachi i fundamental’nye vyzovy [OPEC+: temporary goals and fundamental challenges.] God planet [The Year of the Planet]. (IMEMO) Moscow, Ideya-Press, 2018, pp. 19-28.

3. Smil V. Energy Transitions: History, Requirements, Prospects. Santa Barbara, Praeger, 2010. 178 p.

4. World Energy Consumption – Beyond 500 Exajoules. Available at: http://theoildrum.com/node/8936 (accessed 10.03.2020).

5. BP. Statistical Review of World Energy – all data, 1965–2018. Available at: https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html (accessed 15.05.2020).

6. World Energy Outlook 2019. Available at: https://www.iea.org/reports/world-energy-outlook-2019 (accessed 15.05.2020).

7. Rystad Energy. COVID‑19 REPORT 11th Edition. Global Outbreak Overview and its Impact on the Energy Sector. 20 May 2020. Available at: https://www.rystadenergy.com/globalassets/pdfs/rystad-energy_covid-19-report_20_may2020_public-version.pdf (accessed 22.05.2020).

8. Stanley A. Oil’s Demanding Road to Recovery. Instant Insight, the King Abdullah Petroleum Studies and Research Center (KAPSARC), 17 May 2020. Available at: https://www.kapsarc.org/wp-content/uploads/2020/05/KS-2020-II13-The-Oil-Market-Road-to-Recovery-Begins-1.pdf (accessed 22.05.2020).

9. OPEC. Monthly Oil Market Report. May 2020. Available at: https://www.opec.org/opec_web/en/publications/338.htm (accessed 22.05.2020).

10. Oil Market Report May 2020. Available at: https://www.iea.org/reports/oil-market-report-may‑2020 (accessed 22.05.2020).

11. Energy Information Administration. Short-Term Energy Outlook. May 2020. Available at: https://www.eia.gov/outlooks/steo/ (accessed 22.05.2020).

12. Teo K. China’s Sinopec Forecasts Bleak Oil Demand Outlook. Available at: https://www.argusmedia.com/en/news/2103661-chinas-sinopec-forecasts-bleak-oil-demand-outlook?backToResults=true (accessed 08.05.2020).

13. Muyu Xu, Tom Daly. China’s Crude Oil Imports to Rise 2% y/y in 2020 – CNPC Research. Available at: https://www.reuters.com/article/china-energy-oil-gas/chinas-crude-oil-imports-to-rise-2-y-y-in-2020-cnpc-research-idUSB9N2C500O?rpc=401& (accessed 21.05.2020).

14. Weinland D., Shepherd C. China Drops GDP Target for First Time in Wake of Coronavirus. Available at: https://www.ft.com/content/4c2c6642-04c4-4fc5-bf80-12591975c215 (accessed 22.05.2020).

15. Denning L., Sutherland B. All Those Parked 747s Herald Peak Oil Demand. Jet Fuel Was Once the Last Great Hope for Long-Term Growth. No Longer. Available at: https://www.bloomberg.com/opinion/articles/2020-04-30/coronavirus-air-travel-shutdowns-foretell-peak-oil-demand (accessed 30.04.2020).

16. Clark G., Gupte E. FEATURE: Airlines Prepare for Slow, Gruelling Return. Available at: https://www.spglobal.com/platts/en/market-insights/latest-news/oil/052220-feature-airlines-prepare-for-slow-gruelling-return (accessed 22.05.2020).

17. Zhukov S.V., ed. Transformatsiya mirovogo rynka nefti [Transformation of world oil market]. Moscow, IMEMO, 2016. 300 p.

18. Zhukov S.V., ed. Mirovoi rynok nefti v protsesse peremen [World oil market in the process of change. Moscow]. Moscow, IMEMO, 2017. 118 p.

19. Dale S., Fattouh B. Peak Oil Demand and Long-Run Oil Prices. The Oxford Institute for Energy Studies. January 2018. 11 p. Available at: https://www.oxfordenergy.org/wpcms/wp-content/uploads/2018/01/Peak-Oil-Demand-and-Long-Run-Oil-Prices-Insight-25.pdf (accessed 10.04.2020).

20. Oil 2020. Analysis and Forecast to 2025. DOI:https://doi.org/10.1787/cf9397c0-en

21. OPEC World Oil Outlook 2019. Available at: https://www.opec.org/opec_web/en/publications/340.htm (accessed 15.05.2020).

22. Long-term forecast of world oil demand until 2040 (2019). (Center for energy research IMEMO) (In Russ.) Available at: https://www.imemo.ru/energyeconomics/index.php?page_id=1663 (accessed 15.06.2020).

23. Edwards A., Hurst L. Shell CEO Says Pandemic May Change the Oil Business Forever. Available at: https://www.bloomberg.com/news/articles/2020-04-30/shell-sees-lasting-change-in-consumer-behavior-beyond-pandemic?sref=EtqQfjch (accessed 30.04.2020).

24. Raval A. BP Chief Sees Risk of Oil Demand Passing Peak as Pandemic Hits. Available at: https://www.ft.com/content/21affff2-1e57-4000-a439-62cfef6344fb (accessed 12.05.2020).

25. Biosecurity for Air Transport. A Roadmap for Restarting Aviation. Vol. 2. IATA. 2020. 5 P. Available at: https://www.iata.org/contentassets/4cb32e19ff544df590f3b70179551013/roadmap-safely-restarting-aviation.pdf (accessed 29.05.2020).

26. Whitley A. How Coronavirus Will Forever Change Airlines and the Way We Fly. Available at: https://www.bloomberg.com/news/features/2020-04-24/coronavirus-travel-covid-19-will-change-airlines-and-how-we-fly (accessed 24.05.2020).

27. United States Strategic Approach to the People’s Republic of China. 2020. 16 p. Available at: https://www.whitehouse.gov/wp-content/uploads/2020/05/U.S.-Strategic-Approach-to-The-Peoples-Republic-of-China-Report-5.20.20.pdf (accessed 29.05.2020).

28. Coronavirus Could Change Travel Behavior Forever, Putting 3 Million B/D Oil Demand at Risk. April 17, 2020. Available at: https://blogs.platts.com/2020/04/17/coronavirus-oil-demand-risk-travel/ (accessed 17.04.2020).

29. Kazokoglu C. Why the Coronavirus Crisis Won’t Mark a Peak in Oil Demand. 1 May 2020. Available at: https://www.ft.com/content/b956c056-b22f-4db7-96e1-be0035c743a1 (accessed 01.05.2020).

30. The Car Is Staging a Comeback, Spurring Oil’s Recovery. 10 May 2020. Available at: https://www.bloomberg.com/news/articles/2020-05-10/the-car-is-staging-a-comeback-spurring-oil-s-recovery?sref=EtqQfjch (accessed 10.05.2020).

31. Idle Reduction Benefits and Considerations. Available at: https://afdc.energy.gov/conserve/idle_reduction_benefits.html (accessed 10.05.2020).

32. Sinitsyn M.V. Elektrifikatsiya dorozhnogo transporta i riski sprosa na neft’ [Road transport electrification and risks for oil demand]. Global’nye energeticheskie i ekonomicheskie trendy [Global energy and economic trends]. Zhukov S.V., ed. Moscow, IMEMO, 2019, pp. 88-92. DOI:10.20542/978-5-9535-0551-2

33. Sinitcyn M.V. Tsenovaya konkurentosposobnost’ elektromobilei [Price competitiveness of electric vehicles]. Mirovaya ehnergetika: osnovnye tendentsii, dinamika, perspektivy [World Energy: Main Tendencies, Dynamics and Perspectives]. Zhukov S.V., ed. Moscow, IMEMO, 2018, pp. 9-12. DOI:10.20542/978-5-9535-0531-4

34. E-Mobility Sales Review Q2 2020. April 2020. 19 p. Available at: https://www.strategyand.pwc.com/de/de/studien/2020/e-mobility-sales-review-q1/e-mobility-sales-reviewq1.pdf (accessed 10.05.2020).

35. EV–Volumes. Available at: https://www.ev-volumes.com/ (accessed 10.04.2020).

36. Global Electric Vehicle Sales to Drop 43% in 2020. 8 April 2020. Available at: https://www.woodmac.com/press-releases/global-electric-vehicle-sales-to-drop-43-in-2020/ (accessed 08.04.2020).

37. Kah M. Electric Vehicle Penetration and Its Impact on Global Oil Demand: a Survey of 2019 Forecast Trends. December 2019. Available at: https://www.energypolicy.columbia.edu/research/report/electric-vehicle-penetration-and-its-impact-global-oil-demand-survey-2019-forecast-trends (accessed 19.05.2020).

38. Electric Vehicle Sales to Fall 18% in 2020 but Long-Term Prospects Remain Undimmed. 19 May 2020. Available at: https://about.bnef.com/blog/electric-vehicle-sales-to-fall-18-in-2020-but-long-term-prospects-remain-undimmed/ (accessed 19.05.2020).

39. China Extends Rebates for Electric-Car Purchases to Revive Sales. 31 March 2020. Available at: https://news.bloombergtax.com/daily-tax-report-international/china-extends-rebates-for-electric-car-purchases-to-revive-sales (accessed 31.03.2020).

40. EU Communication from the Commission to the European Parliament, the European Council, the Council, the European Economic and Social Committee and the Committee of the Regions. The EU Budget Powering the Recovery Plan for Europe. Available at: https://ec.europa.eu/info/sites/info/files/about_the_european_commission/eu_budget/1_en_act_part1_v9.pdf (accessed 27.05.2020).

41. Krukowska E., Shankleman J. World’s Greenest Coronavirus Recovery Package Arriving in Europe. 20 May 2020. Available at: https://www.bloomberg.com/news/articles/2020-05-20/eu-to-unveil-world-s-greenest-virus-recovery-package (accessed 20.05.2020).

42. Franke A. Germany Agrees Eur25/mt Start to CO2 Tax for Transport, Heating. S&P Global. 20 May 2020. Available at: https://www.spglobal.com/platts/en/market-insights/latest-news/electric-power/052020-germany-agrees-eur25mt-start-to-co2-tax-for-transport-heating (accessed 20.05.2020).

43. The Climate Deregulation Tracker. Columbia University Earth Institute. Available at: https://climate.law.columbia.edu/climate-deregulation-tracker (accessed 24.05.2020).

44. Popovich N., Albeck-Ripka L., Pierre-Louis K. The Trump Administration Is Reversing Nearly 100 Environmental Rules. Here’s the Full List. Available at: https://www.nytimes.com/interactive/2020/climate/trump-environment-rollbacks.html (accessed 06.05.2020).

45. NHTSA Final Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule Setting Corporate Average Fuel Economy (CAFE) and CO2 Emissions Standards for Model Years 2021–2026 Passenger Cars and Light Trucks. Available at: https://www.nhtsa.gov/corporate-average-fuel-economy/safe (accessed 31.03.2020).

46. Petroleum Refinery Sector Rule (Risk and Technology Review and New Source Performance Standards). 4 February 2020. 24 p. Available at: https://www.govinfo.gov/content/pkg/FR-2020-02-04/pdf/2020-01108.pdf (accessed 04.02.2020).

47. Proposed Policy Amendments 2012 and 2016 New Source Performance Standards for the Oil and Natural Gas Industry. Washington, EPA, 28 August 2019. Available at: https://www.epa.gov/controlling-air-pollution-oil-and-natural-gas-industry/proposed-policy-amendments-2012-and-2016-new (accessed 28.08.2019).

48. National Performance Management Measures; Assessing Performance of the National Highway System, Freight Movement on the Interstate System, and Congestion Mitigation and Air Quality Improvement Program. 31 May 2018. 17 p. Available at: https://www.federalregister.gov/documents/2018/05/31/2018-11652/national-performance-management-measures-assessing-performance-of-the-national-highway-system (accessed 31.05.2018).

49. Executive Order Regarding Efficient Federal Operations. 17 May 2018. Available at: https://www.whitehouse.gov/presidential-actions/executive-order-regarding-efficient-federal-operations/ (accessed 17.05.2017).

50. Presidential Executive Order on Promoting Energy Independence and Economic Growth. 28 March 2017. Available at: https://www.whitehouse.gov/presidential-actions/presidential-executive-order-promoting-energy-independence-economic-growth/ (accessed 28.03.2017).

51. Treadgold T. Back to the 90s for Oil, Says Goldman Sachs. Forbes, 21 May 2020. Available at: https://www.forbes.com/sites/timtreadgold/2020/05/21/back-to-the-90s-for-oil--says-goldman-sachs/#7a617eac3536 (accessed 21.05.2020).

52. World Energy Balances. Available at: https://www.iea.org/subscribe-to-data-services/world-energy-balances-and-statistics (accessed 21.05.2020).

53. EUROSTAT Energy Database. Available at: https://ec.europa.eu/eurostat/web/energy/data/database (accessed 21.05.2020).


Registered in System SCIENCE INDEX

For citation:
Kopytin I. World Oil Market: The Pandemics Will Bring Global Peak Oil Demand Closer. World Eonomy and International Relations, 2020, vol. 64, no. 9, pp. 26-36. https://doi.org/10.20542/0131-2227-2020-64-9-26-36



Comments (0)

No comments

Add comment







Indexed

 

 

 

 

Dear authors! Please note that in the VAK List of peer-reviewed scientific journals, in which the main scientific results of dissertations for the degree of candidate and doctor of sciences should be published for the “MEMO Journal” the following specialties are recorded:
economic sciences:
5.2.5. World Economy.
5.2.1. Economic Theory
5.2.3. Regional and Branch Economics
political sciences:
5.5.4. International Relations
5.5.1. History and Theory of Politics
5.5.2. Political Institutions, Processes, Technologies

 

Current Issue
2024, vol. 68, No. 4
Topical Themes of the Issue:
  • Financial Contagion Propagation in Europe under the Impact of Global Shocks
  • Regional Powers on the African Continent: Trends and Prospects
  • Investment Activity of the PRC in the Kyrgyz Republic
  • “Land Grabbing” Concept: Global and National Aspects
Submit an Article
INVITATION FOR PUBLICATION
The Editorial Board invites authors to write analytical articles on the following topics:
  • changes in the processes of globalization in modern conditions
  • formation of the new world order
  • shifts in civilization at the stage of transition to a digital society

The editors are also interested in publishing synthesis articles / scientific reviews revealing the main trends in the development of certain regions of the world - Latin America, Africa, South Asia, etc.