Peak Gasoline Usage
The IEA Oil Forecast shows gasoline demand has peaked but overall oil demand is another matter.
The speed and depth of the recovery is likely to be uneven both geographically and in terms of sectors and products. Gasoline demand is unlikely to return to 2019 levels, as efficiency gains and the shift to electric vehicles eclipse robust mobility growth in the developing world. Aviation fuels, the hardest hit by the crisis, are expected to slowly return to 2019 levels by 2024, but the spread of online meetings could permanently alter business travel trends.
In the current policy environment, US production growth is set to resume as investment and activity levels pick up in tandem with rising prices. Yet any increase is unlikely to match the lofty levels of the recent past.
Global oil demand, still reeling from the effects of the pandemic, is unlikely to catch up with its pre-Covid trajectory. In 2020, the start of our forecast period, oil demand was nearly 9 mb/d below the level seen in 2019, and it is not expected to return to that level before 2023.
Further fuel efficiency improvements, increased teleworking and reduced business travel, much stronger electric vehicle penetration and new policies to curb oil use in the power sector and more recycling could reduce oil use by as much as 5.6 mb/d by 2026, which would mean that oil demand never gets back to pre-crisis levels.
In the absence of more rapid policy intervention and behavioural changes, longer-term drivers of growth will continue to push up oil demand. As a result, by 2026, global oil consumption is projected to reach 104.1 mb/d. This would represent an increase of 4.4 mb/d from 2019 levels. Oil demand in 2025 is set to be 2.5 mb/d lower than was forecast a year ago in our Oil 2020 report.
Demand growth relative to 2019 is expected to come from emerging and developing economies, underpinned by rising populations and incomes.
Behavior Changes
- The new working-from-home models to cuts in business and leisure air travel.
- More governments are focusing on the potential for a sustainable recovery as a way to accelerate momentum towards a low-carbon future.
- A shift towards electric cars will accelerate
- Better efficiency in gas-powered cars
Electric Cars
The IEA expects global electric car sales to reach over 12 million in 2026, with a total fleet size close to 60 million. More than half of all electric cars will be situated in China, which took an early lead in their development, a quarter in Europe, the rest in Japan, the United States and other countries. By 2026, electric cars and buses will displace more than 1 mb/d of oil demand – 700 kb/d of gasoline demand and 300 kb/d of diesel – compared to 2020 levels.
Future Gas Demand
The OECD’s 37 members are: Austria, Australia, Belgium, Canada, Chile, Colombia, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States.
Oil Refinery Demand
The combined demand for refinery-supplied gasoline, kerosene and diesel is forecast to decline by 170 Kb/d from 2019 to 2026, a sharp contrast to the previous seven years, when it increased by 6.2 mb/d. These products usually price at a premium to crude oil and are essentially the backbone of refinery economics.
The pandemic has effectively offered refiners a sneak peek into the future of sharply lower transport fuel demand. They should use this opportunity to adjust their strategies accordingly. This bears bad news for petrochemical producers, too. Barring higher than expected NGL output, they will have to share some of their margins with refiners to secure feedstock production in refineries.
Demographics and Changing Attitudes
The article did not mention changing demographics. The baby boomers had a love relationship with cars unlike any other generation.
Millennials and Gen Z are more content to use public transportation, work closer to home, text or play online games, etc. rather than take a casual spin in the car.
Mish
They should use this opportunity too adjust their strategies accordingly!
Well the IAEA is talking nonsense, if it attributes use to flat demand. Vehicle ownership in the US is towards 100 % , the world as total is around 20 % (an online estimate). The US (and west) are small part of world population. The point is that gasoline use depends on how much and at what price producers choose/are able to supply, crossed with how much is actually available (total oil).
These guys are predicting an earthquake’s date and time. Ignore them.
Too, this earthquake may not happen at all! For instance, EVs have some advantages, some disadvantages, but they don’t satisfy the 10x rule. They are not 10x better than an ICE vehicle. So EV uptake – or downtake – will be gradual.
One element of their prediction is not an earthquake: Remote working. That’s been a gradual and steady trend for some decades now. And will continue. But remote working can raise or lower petro consumption. We’ll see.
Travelling should be made extremely expensive if only in the name of climate change and to stop pandemics from moving all over the planet in a couple of hours…and the rif raf economically banned from the airports….wouldn t life be great again …
People are fed up with working at home, they are eager to go to the office, meeting their friends and even lovers , businessmen want to travel and ‘enjoy’ the life of a travelling businessman, I m retired now, yet I know what mixing pleasure and business is all about….
Guardian headline: Global lockdown every two years needed to meet Paris CO2 goals – study
“The new working-from-home models to cuts in business and leisure air travel.”
I have been seeing articles recently from the “in-office” stakeholders that the work-from-home model will soon dissipate and the vast majority of workers will return to the daily commute into an office. Two primary reasons are:
Surely many will return to the office but I think it’s too early to make a “vast-majority” call. Businesses are saving a bundle on office leases. Also some will go into a hybrid work from home model which also means less commuting overall.
I think the main point to absorb is that there will be a significant number of businesses which will continue to have employees work remotely, but which would have very likely not considered doing so (or do so to a much lesser degree) before the pandemic. Many consulting engagements have also moved to be done remotely which will affect business travel.
In addition, many organizations have moved to serve many functions to their customers on line rather than in person. These are investments in online processes they would have likely not undertaken anytime soon were it not for the pandemic and now they are going to maintain these online functions.
I think the world will look quite different once we come out of this thing but it might be a bit too early to call winners and losers at this point though.
I think the IEA’s predictions on total energy use are good if you look back in. On the other hand their energy price predictions are not very good as are just about everyone else’s’. The current prediction is on the mix of energy used which depends on societal patterns and they believe that some of them are changing. They basically use the patterns Covid caused and extrapolated them out. I have some doubts as to their assumptions. People travel because they like to and unless costs rise drastically they will go back to driving and flying. Covid made people to work from home and some like it but as anyone who has worked in a big company knows physical proximity to deciders is critical to your career. Also some problems can only be fixed by a face to face so although business travel will go do I don’t expect it will by much. In developed countries you can predict a bit how elect cars will do but in the developing world, which is becoming more and more rich, I doubt that electric cars will be dominate. South America and Africa are not conducive to electric cars because of distances and the need for flexibility. To sum it up the IEA does a good job but predicting the future is more often than not a roll of the dice.
I expect that in 2 decades, we will be like the Cubans repairing ancient cars. With the travel I do for work, mostly in rural areas, there is no way an EV an option. Likewise, I bet mining the lithium for the EV battery is more polluting than oil and gas.
Since most gasoline is used in vehicles this makes a great deal of sense. Just as we are about to emerge from the pandemic the vast number of automakers are scheduled to bring online electric vehicles.
Few other things. Air travel is way down and new planes are much more fuel efficient. Same thing with trains, increased fuel efficiency and more and more trains are electric as well
The IEA’s forecast record is not very good. While I realize that “past performance is no guarantee of future performance”, I might make an exception this time.
I think the IEA i a fantastic resource
I’ll take the over that on world gasoline production has peaked.
Vegas probably won’t take that bet.
Transit use in Houston dropped from 2016 to 2019, pre-COVID19.
Electric cars won’t make up more than 25-30% of sales by 2030.
2019 global auto sales 75 million.
12 million BEV sales in 2016 likely less than 15% of total global auto sales.
Chart shows gasoline sales dropping in Mexico? Really?