Oil

When it comes to individual products, demand for gasoline might never return to pre-pandemic levels as efficiency gains and the shift to electric vehicles balance out robust mobility growth in the developing world. Despite efforts to curb plastics use and encourage recycling, demand for plastics and petrochemicals is growing strongly. As for regional consumption trends, Asia continues to dominate growth. By contrast, in many advanced economies, where vehicle ownership and oil use per capita are already at much higher levels, demand is never expected to return to pre-crisis levels. Depending on the extent of government policy initiatives and the pace of consumer behaviour changes, global peak oil use could come anytime between the mid-2020s and the mid-2030s.

To meet the expected growing demand over the coming years, producers from the Middle East will lead the global oil supply increase, largely from existing wells that can jack up production at short notice at low cost. Higher-cost producers in other regions of the world have curtailed investments in recent years, spooked by recent bouts of tumbling commodity prices, hobbling their ability to respond quickly to rising demand. The Middle East’s expanding market share would mark a dramatic shift from recent years when the United States dominated growth. As for downstream, Covid-19 left the world with excess refinery capacity that recent closures have only just begun to correct.

Last updated Jan 25, 2022