Oil and gas industry experts were forecasting demand for oil would peak by 2040 only a few months ago. They were of the view that after 20 years, climate-related projects would be the focus and industry would move away from fossil fuels. However, experts are now wondering if the best days for oil are indeed over and the pandemic has only given an impetus for a gradual shift away from the resource sooner than expected.
This could be the case in some regions of the world, especially Europe that is using this crisis to steer its people and companies towards a decarbonised future. But in developing countries, governments will continue to rely on fossil fuel to power growth in the short to medium term. The US energy industry is unlikely to abandon the sector anytime soon and is more likely to continue investing in fossil fuels.
On the whole, demand for oil is likely to return. For now, Opec has lowered its output to the lowest level in nearly three decades. Members of the exporters' group have cut production by 1.93 million barrels per day to 22.69 million in June.
But this doesn't suggest sustained cuts will become the norm. A recent report by JP Morgan notes that global oil oversupply is expected to reverse by 2022, inventories are expected to be drawn down, and economic recovery will pick up. The International Energy Agency too believes that demand will rise past its peak before plateauing around 2030.
The adoption of electric vehicles, and Tesla becoming the most valuable automaker this year overtaking Toyota point to an enthusiasm among people for electric cars, but this trend must be viewed with the rising sales of fuel-guzzling sports utility vehicles outside the US too.
This crisis is an opportunity for governments to invest in greener projects while setting their eyes on a low-carbon future. People could adopt more sustainable ways of living with less travel. But this doesn't suggest that the oil era is over. Demand has fallen, albeit temporarily during this crisis but a revival can be expected when the pandemic is controlled and the world begins to return to business with renewed vigour.
Copyright © 2020 Khaleej Times. All Rights Reserved. Provided by SyndiGate Media Inc. (Syndigate.info).