The International Energy Agency on Monday shocked stakeholders in oil and gas industry that global oil consumption has yet to peak amidst concerns that the devastating effect of COVID 19 pandemic on the industry is yet to recede.
The warning is also coming on the heel of oil prices retreating from the highest level in more than two months with doubts emerging over the strength of China’s economic recovery and as tensions rose between Washington and Beijing.
The Nigerian economy which depends on crude oil for it foreign earnings may also not get the necessary relief early enough. The 2020 budget was based on $20 per barrel budget benchmark having being reviewed from $30 per barrel because of the cascading oil prices. The budget has also been cut drastically to because of this situation
Oil prices have climbed nearly uninterrupted since late April, but the gains could be coming to an end. Last weekend oil prices fell sharply, hitting the pause button on a rally that saw WTI rebound from -$37 per barrel on April 20, to nearly $34 per barrel on May 21, a more than $70-per-barrel swing in just a few weeks. Of course, the plunge deep into negative territory was likely a unique, one-off phenomenon. Nevertheless, the rally back into (positive) $30 territory has been impressive.
“In the absence of strong government policies, a sustained economic recovery and low oil prices are likely to take global oil demand back to where it was, and beyond,” Fatih Birol said in an interview with Bloomberg.
The world consumed last year nearly 100 million barrels a day of oil, and some in the energy industry believe that could mark the peak for global demand. The hypothesis is that the coronavirus outbreak will trigger changes, like widespread working-from-home and less overseas travel, reducing consumption permanently.
The IEA, which advises the world’s richest countries on oil policy, is sticking to its view that global oil demand will continue to increase over the next decade or so, before reaching a plateau around 2030.
Birol is urging governments to use their economic recovery packages to fight climate change, spending on green energy to help to achieve the goals set in 2016 Paris accord.
He said: “Behavioral changes in response to the pandemic are visible but not all of them are negative for oil use. People are working from home more, but when they do travel, they are more likely to be in cars than public transport,” he said.
