May 9, 2023 - Energy & Environment

The COVID pandemic was not an oil inflection point

Global oil demand
Data: International Energy Agency; Chart: Axios Visuals

With the formal end of World Health Organization and U.S. COVID emergency designations, let's revisit how the tragedy changed — and didn't change — global energy.

The big picture: Back in 2020, some analysts predicted global oil demand might never fully come back from COVID destruction, or would peak earlier than once believed.

  • But see above — the world's consumption has proven resilient (though U.S. gasoline use may never come all the way back).

What they're saying: "COVID didn’t produce the permanent shift in oil demand that some anticipated," said Ben Cahill, an oil expert with the Center for Strategic and International Studies.

  • "The demand impact of more telecommuting is limited, and travel has returned with a vengeance," he said via email.
  • "We also tend to over-emphasize demand destruction in rich states relative to demand growth elsewhere."

The intrigue: The last few years have seen powerful forces acting on oil use, such as the Russian invasion of Ukraine, price spikes, and the rocky global economic outlook.

  • So crystal balls are even cloudier than usual.

What we're watching: Rapidan Energy Group President Bob McNally expects global economic growth will remain very petro-intensive this decade, despite EV adoption that's displacing rising amounts of oil.

  • "Peak demand isn’t likely anytime soon and the COVID demand crunch was bound to prove a false dawn for those rooting for the end of oil," he tells Axios via email.
  • "The only thing holding back oil demand from growing even faster are proven but temporary demand killers: price spikes and economic weakness."

Yes, but: The pandemic's energy impact goes beyond oil. A number of nations — to varying degrees — stitched low-carbon energy into COVID recovery packages.

The bottom line: Counterfactuals are hard, so there's no way to know oil's future if COVID never happened. But the pandemic was no inflection point.

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