Global demand for crude oil has yet to reach its peak, despite challenges to demand caused by the coronavirus pandemic, International Energy Agency Executive Director Fatih Birol told Al Arabiya.
Birol echoed statements that he gave last year in May, early in the pandemic. The oil and gas industry has been upended this year in the face of COVID-19, with demand falling at an unprecedented rate as appetite for petroleum products collapsed.
“With the economic recovery we will see oil demand rebound. If you want to have a concrete example look at the China. China was the first country which we have seen the coronavirus, first country which was effected from coronavirus impacts on the economy, but China was the first country getting out of the pandemic and economy rebounding,” Birol said.
“Today, the Chinese economy is rebounding, and Chinese oil demand today is higher than the year 2019, so there is already with the rebound of the economy. We see an automatic rebound of the oil demand, so in my view it is premature to say that we have seen the peak oil demand in the absence of government policies put in place,” he explained.
Experts have previously warned that global demand for oil will likely not return to 2019 pre-coronavirus highs by the end of 2021 or later until early 2022.
Birol likewise noted that the risk to any oil demand projections for the rest of this year are all dependent on how the pandemic will progress. In particular, he highlighted the importance of vaccination efforts as a key figure to watch.
“If vaccine efforts around the world are not successful, both in terms of the vaccinations of millions of people and also the effect of the vaccination, we may see that there is a significant downside risk … in my view the downside risks here are slightly stronger than the upside risks,” Birol said.
Despite COVID-19 vaccination drives have recently been plagued by repeated distribution and supply problems, the rollout of the vaccine has still been a net positive for the oil demand outlook. Birol noted that “as things stand now, we are slightly less pessimistic than we were a month ago” with regard to the IEA’s oil demand forecast.
Global clean energy transition
Governments around the world have been pushing harder to move their energy infrastructure towards renewable energy. Furthermore, US President Joe Biden’s victory in the US presidential election last year has renewed efforts to fight climate change, with Biden announcing the US would rejoin the Paris Climate Agreement.
“As we speak now all European countries, UK, Japan, Korea, China, and, very soon, the United States, will commit themselves to net zero emissions by 2050, which means many things need to change in the energy sector because our climate challenge is essentially an energy challenge,” Birol said.
This transition will have a drastic effect on the nature of the global oil market, Birol explained.
“I tell you no country oil producing, oil consuming, no company, will be unaffected from clean energy transitions,” he said.