Has global oil demand reached its peak?

On June 18, Saudi Aramco acquired SABIC at a premium of 30%, completing the acquisition of the world's fourth largest chemical enterprise by the world's largest oil company, which is also the largest acquisition in the world this year. It also shows that Saudi Arabia further integrates the upstream and downstream of petrochemical industry and strengthens its production capacity. However, in terms of the current development and changes of the whole oil market, there is a big question: whether the global oil demand has reached its peak and whether there is still room for it?

The International Energy Agency (IEA) said on the afternoon of June 16, Beijing time that it expects the decline of crude oil demand in 2020 to reach the highest level in history. In the monthly report just released, IEA believed that the blockade measures had the most serious impact in the second quarter of this year, with crude oil demand decreasing by 17.8 million barrels per day compared with the same period last year, which set a record for a single quarter, but smaller than the previous expectation of the organization. It also predicts that crude oil demand in 2020 is expected to decrease by 8.1 million B / D year-on-year, and oil demand in 2021 will still be 2.4 million B / D lower than that in 2019.

Another authority, the U.S. Energy Information Agency (EIA) and the IEA, have similar predictions. In the latest short-term outlook in June, EIA believes that the average global oil and liquid fuel consumption in 2020 will be 92.5 million B / D, 8.3 million B / D less than that in 2019, and the demand in 2021 will still be 1.1 million B / D lower than that in 2019.

However, the EIA's earlier forecast was more optimistic. In April 2020, the EIA predicted that crude oil consumption will rise to 100 million barrels per day by the end of 2020, and the global annual consumption will only decrease by 5.2 million barrels. It is estimated that the daily consumption in 2021 will be 102 million B / D, which is about 7 million B / d higher than that in 2020 and 1% higher than the level of US $100.8 million in 2019.

This increasingly pessimistic expectation means that the impact of the new epidemic exceeds expectations. Since the beginning of this year, the blockade measures taken by various countries to slow down the spread of the new coronavirus have caused an unprecedented impact on the global oil market. Even though OPEC and Saudi Arabia have cut production by a large margin and oil prices have nearly doubled in the last two months, oil prices are still down by more than 40% compared with the beginning of the year. In the long run, a more serious problem is that the new epidemic will slow down the arrival of the peak global oil demand. When the demand reaches its peak, the demand for oil will not only stop rising, but will continue to decrease.

Oil demand is expected to peak in 2040 or earlier, according to a report released by the International Monetary Fund in March. Under the current situation of weak oil market, some people believe that the peak of global oil demand has arrived, and the global oil consumption will hover between 95 million and 100 million barrels / day in the next few years, and then turn around and go down.

The primary reason to support the peak of oil demand is that the efficiency improvement of fuel vehicles may offset the growth of population and transportation demand. An important reference is the situation in the United States. U.S. crude oil demand peaked at 20.8 million barrels per day in 2005. Despite a population growth of 20 million and a nearly 10% increase in vehicle mileage, U.S. oil consumption in 2019 is still lower than that in 2005.

The second is the impact of traffic electrification. Many countries, including China, are vigorously promoting electric vehicles. Fuel cell vehicles driven by hydrogen energy are also widely put on the agenda. Some countries have even set timetables for phasing out fuel vehicles. Some analysts believe that in the conservative forecast, the penetration rate of new energy vehicles in China's market in 2050 will also reach more than 40%.

The above analysis did not take into account the far-reaching negative impact of the new epidemic on oil demand. The new epidemic may cause permanent damage to global oil demand. A well-known factor is the change of consumers' working style and consumption behavior. Almost every individual consumer who works and their employer experience the advantages and disadvantages of working from home, but research shows that it is the best to strike a balance between office work and telework. After the outbreak, working at home should be more common than before. Facebook even announced that employees could work permanently from home. This change may be more obvious in countries like China and East Asia that lack a flexible work culture. These changes have greatly reduced the demand for commuting.

More generally speaking, due to the blockade of various countries and regions, many meetings, conferences and exhibitions have been cancelled, and air transportation has been greatly reduced. According to the data of the International Air Transport Association, the air passenger volume in 2020 will drop by nearly 55% compared with that in 2019. This quasi natural experiment, lasting for several months or even a year, has made many organizations and individuals realize that many face-to-face meetings can be avoided or implemented online. "Cloud" meetings not only save transportation costs, but also save travel and meeting time. This kind of "cloud" meeting will greatly reduce the demand for air transportation and more or less curb the vigorous development of aviation fuel.

On the production side, the new epidemic has led countries to rethink their supply chain security. Localized production has become an option for developed countries to reconsider. This anti globalization action will reduce the global industrial division and the consequent demand for aviation and shipping.

Of course, with the economic development and the improvement of people's living standards, the demand for chemical raw materials will rise sharply, which will drive the demand for petrochemical products and offset the impact of fuel decline to a certain extent. However, the proportion of chemical raw material oil in the total global consumption is low. In 2017, in OECD countries, the proportion was only 14%, while transportation oil accounted for 63%. The change of transportation demand determines the overall situation of oil demand.

Due to the long-term impact of the new epidemic, although it is not yet possible to judge whether the global oil demand has reached its peak, it is certain that the peak will be ahead of schedule. Oil and related industries must recognize this new situation and formulate corresponding countermeasures.