The COVID-19 pandemic resulted in a rollercoaster effect on global oil demand and some uncertainty surrounding future global demand. But has the world reached peak oil?
The answer is no, according to a new report from researchers at Columbia University’s Center on Global Energy Policy, Rice University, the University of California – Davis, Tufts University and S&P Global Platts.
These researchers analyzed the impacts of COVID-19 and global policies on oil demand in four post-pandemic scenarios, comparing the “degree of policy intervention to accelerate adoption that reduces oil demand” with the overall impact of the pandemic. In three of the four scenarios, long-term oil demand increased, mostly due to trends established at the height of the pandemic.
From shopping to supply chain
The study finds the increased use of personal vehicles during the pandemic, increase in e-commerce and the increased production of personal protection equipment as reasons for the forecasted increase in demand as a direct cause of COVID-19. Additionally, the pandemic accelerated many trends worldwide, such as e-commerce, even in countries where it was not previously forecasted. As the report explains:
“In many countries, online shopping had stalled because of underdeveloped infrastructure and the reluctance, or inability, of consumers to use banks and electronic payment. COVID forced rapid change.”
Not only did the global increase of online shopping led to increased oil demand, but it also led to an increase in demand across the entire supply chain. As Energy In Depth noted last year, the increased demand of goods caused by the pandemic was met by the shipping industry which relied on affordable, reliable energy produced in the United States to power trucks and get goods to market.
The report now shows this increase is expected to continue:
“There has also been an increase in the number of intra-regional and last-mile truck trips, while the average length of the haul has declined in the United States. These trends are consistent with rising e-commerce and reduced international trade where long-haul trucks are required to move goods from ports to inland markets.”
Increasing demand all around
The COVID-19 pandemic transformed large swaths of day-to-day life and accelerated trends that were assumed to be years away. However, the increase in oil demand seen in this study follows other forecasted trends for oil and natural gas.
All around the world, countries are transitioning towards increased natural gas use in their energy mixes as a key way of reducing their greenhouse gas emissions. The use of natural gas, mostly from the United States, is expanding in Asia. For example, Vietnam is planning to more than double its imports of LNG between 2026 and 2035. Other countries in the region, such as China, are further relying on natural gas to meet climate goals and ensure reliable power.
Conclusion
While the energy transition is full steam ahead, current demand for oil and natural gas continues to increase. These fuels are helping us power our present lives and will continue to do so for years to come.
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