Likely not in crude oil consumption, but the IEA is now projecting that demand for gasoline will never return to its pre-COVID level.
This past week the International Energy Agency (IEA) issued an intriguing forecast about future of gasoline consumption. If true, it means that the world will have reached its peak demand for gasoline back in 2019, and won’t ever again return to that level.
Of course, with the advent of electric vehicles, the day when gasoline demand would begin to decline was bound to come sooner or later. But the COVID-19 pandemic has hastened the event.
During the widespread restrictions on work and travel imposed by most governments in 2020, daily gasoline demand dropped by more than 10%. Some of that demand is expected to return, but the global shift towards electric vehicles — not to mention continuing improvements in fuel efficiency in conventional gasoline-powered vehicles themselves — means that any growth in demand for gasoline within developing countries will be more than offset by these other forces.
In 2019, only around 7 million electric vehicles were sold worldwide, but that number is expected to grow steadily, reaching 60 million annually just five years from now. Several major car manufacturers have committed to selling electric vehicles exclusively in future years, including Volvo (committed to all-electric vehicle sales by 2030) and GM (by 2035).
As for the demand for crude oil, it is expected to rebound from 2020’s dip to reach as much as 104 million barrels per day by 2026, which would be around 4% higher than the usage that was recorded in 2019. Asian countries – particularly China and India – will be responsible for all of that increase and more, even as some developed nations are expected to see a drop in their demand for crude.
The implications of these forecasts are far-reaching – as are the questions they raise. How well will the legacy car companies perform in comparison to the new all-electric car company upstarts? Can they remake themselves quickly enough to preserve their market position vitality?
What will the effects of lower demand for gasoline – and a lower pace of growth in demand for crude – be on global climate change? Dramatic? … or only minimal?
What do the prospects of lessening demand for crude do to the economies (and politics) of countries like Saudi Arabia, Iran, Venezuela and other key OPEC nations? Will lowered demand lessen geopolitical tensions? … or contribute to even bigger ones?
If you have thoughts or perspectives on these points, please share them in the comment section below.