Bernstein has published research of the impact of social distancing on oil demand, suggesting that it may not be as big as it appears.
On 20 May, it set out how COVID-19 will reduce global oil demand by 9-10% in 2020 – the largest fall observed since the great depression. The majority is to be concentrated in the second quarter of 2020 with a decline of more than 20MMbls/d. However, it projected demand to have recovered by the fourth quarter, reaching within 3-4% of 2019 levels.
Remote working was cited as the biggest threat, though, while a fall in commuting and business air travel is negative, only 30% of all passenger kilometres account for work-related travel – 10% of global oil demand. Social distancing and reduced public transport have led to increased oil demand in some areas. In China, despite the latest data showing a 50% fall in public transport and air travel, demand for ride hailing apps has increased. With road travel in a car having a higher oil intensity than public transport or air travel, Bernstein said this will result in increased demand in some areas and offset declines in mobility.
GDP and population growth remain key drivers for demand. With a sharp economic recovery forecast in 2021, and the global population set to grow by 2.2bn over the next 30 years, Bernstein said these factors suggest peak oil demand may not yet have been reached.
The greater uncertainty remains how government policy will change and whether governments will have a greater focus on limiting climate change. The COVID-19 pandemic has proven a “lesson” on what can happen if failing to tackle environment threats and some governments may now be catalysed to accelerate carbon limiting policies. However, Bernstein noted that the decoupling between the world’s largest polluters – the US and China – is not encouraging for the global response needed to tackle emissions.