Data from post-Covid China shows that peak oil demand has not yet been reached, despite arguments to the contrary from the likes of DNV GL, BP and Shell, according to the head of the International Energy Agency (IEA).
Executive director Fatih Birol told the Energy Transition North America online conference on Friday that China — the first economy to emerge from the Covid pandemic — will see oil demand in 2020 “very close to where it was in 2019”.
There are also no reasons why carbon emissions — which are due to fall by 7% year-on-year in 2020 — will not rebound in the coming years, he added.
“There has been a lot of discussion on [whether] the world has reached Peak Oil, and [that demand] is going to decline. This year, we expect oil demand will be about 9% lower than in 2019 on average. But [at the] IEA, we do not subscribe to the argument that oil demand is in a terminal decline,” Birol told the Reuters conference.
“The reason is the following: the decline is mainly happening because of the economic downturn and its impact on oil demand and the restrictions on transportation — a major driver of oil demand. When we look at other sectors, for example, petrochemicals, oil demand consumption is more or less there where it was in the year 2019.
“And we say that if the governments do not take policy measures in terms of reducing the oil consumption in their countries… we believe that when the economy rebounds we may well see oil demand getting back to the levels we have seen in the year 2019. In fact, these are arguments and expectations, but there is data to prove that the IEA argument is, in my view, a sound argument: namely, China.”
Birol points to China because, he said, it has been the first country to emerge from coronavirus lockdowns and to see its economy rebound in a post-Covid environment.
“Today, Chinese oil demand is very close to where it was in the year 2019 because no new policies were introduced, people are going back to their habits, their [previous] consumption [patterns].
He adds that while the Covid crisis may have made people think more about how to move away from fossil fuels — and there have certainly been plenty of calls for governments to exclude hydrocarbons from post-Covid economic stimulus packages — these are just “emotions, thoughts, feelings, expectations”.
“When you get [back to] real life, as long as there are no [new] government policies introduced, we may well see global oil demand to go where it was before.
“Having said that, we do not expect [that the] oil-demand-increase rates we have experienced in the last ten years or so will continue. We expect that global oil demand will flatten in the next few years after the economy is back to its normal pace.”