A small parade of analysts stepped out last week with projections that global oil demand and carbon dioxide emissions likely peaked last year, with consumers’ need for refined oil products hitting a turning point and more big fossil companies expected to declare “impairments” in their production assets in the not-too-distant future.
The follow-ups come after colossal fossils BP and Shell downgraded the value of their combined assets by as much as US$39.5 billion over the last couple of weeks.
On Wednesday, Oslo-based energy consultancy DNV GL said the COVID-19 pandemic will likely have a lasting impact on both oil demand and emissions, predicting that global energy use in 2050 will be 8% lower than it previously expected. “Lasting behavioural changes to travel, commuting and working habits will also decrease energy usage and lessen demand for fossil fuels from the transport sector, as well as from iron and steel production,” the company said in a research note.
“While we expect oil demand to recover next year, we think that it’s likely that it will never reach the levels seen in 2019,” Sverre Alvik, head of DNV GL’s Energy Transition Outlook, told Reuters. While the reductions would not be enough to bring fossil emissions in line with the goals in the 2015 Paris Agreement, “COVID-19 has shown that behavioural changes are indeed possible, and we can use this opportunity to make a change which is good for climate,” he added.
Elsewhere, consultants at Wood Mackenzie say BP and Shell may have been the first fossils to acknowledge some of the stranded assets they hold, but they won’t be the last. “This process has further to run and we expect further large impairments to occur across the sector,” said Angus Rodger, a director in WoodMac’s upstream research division, in a statement to industry newsletter Rigzone.
And Citigroup analysts believe the demand for refined petroleum products like gasoline and aviation fuels will never return to their pre-pandemic highs, Bloomberg writes. “As the global economy restarts, fewer people will fly and use their cars,” the news agency states, citing a Citigroup report. “With meetings going virtual and business no longer needing to move employees around the world in the same way as before, there will be powerful forces pushing a transition away from oil.”
The immediate impacts of the pandemic are hitting the fossil industry on the ground, with the U.S. Petroleum Equipment and Services Association reporting more than 84,000 jobs lost in the country’s oilfield services sector, including 57,000 in Texas.
“It looks like the job loss is continuing at a slower pace, though jobs are still being lost,” PESA Communications Director Kevin Broom told the Midland Reporter-Telegram. “It’s good that the pace is slowing, but in looking at the situation with the COVID-19 pandemic, the future is considered uncertain.”