Pump jacks operate at sunset in Midland, Tex. in February, 2019. Countries in full lockdown have seen their weekly energy demand fall by about a quarter.NICK OXFORD/Reuters
Global demand for energy wiped out by the COVID-19 pandemic is “without precedent,” with March oil consumption alone plummeting by a record 10.8 million barrels a day, according to an International Energy Agency analysis of the past 100 days of the pandemic.
Total energy demand declined by 3.8 per cent in the first quarter of 2020, and IEA director Fatih Birol expects oil to take “months, maybe years” to return to prepandemic levels.
While the world will “still need oil in years to come,” Dr. Birol told The Globe and Mail from Paris on Wednesday that the extreme economic and demand shock caused by the pandemic will likely plunge consumption of crude this year to 2012 levels.
Countries in full lockdown have seen their weekly energy demand fall by about a quarter, and those in partial lockdown by an average of 18 per cent. Total global oil demand in 2020 is expected to fall by about nine million barrels a day.
Dr. Birol said that will have “major implications” for his agency’s future global oil demand projections.
Reduced mobility is the prime culprit in the global knock to oil demand.
Moving people and commodities around the world accounts for 57 per cent of global oil demand, but transportation has declined precipitously amid the pandemic.
“The absolute decline in global energy demand in 2020 is without precedent, and relative declines of this order are without precedent for the last 70 years,” the IEA report notes, with all fuels except renewables set to experience their greatest contractions in demand for decades.
Impact of each month of containment
measures on expected annual GDP
by sector in selected regions
Agriculture, mining
and quarrying
Business, trade and
public services
Manufacturing, utilities
and construction
Hotel, restaurants
and other services
Transport services
Overall GDP
Italy
France
Germany
Britain
Spain
U.S.
South Korea
Canada
Australia
India
China
World
-5
-4
-3
-2
-1
0%
SOURCE: IEA
Impact of each month of containment
measures on expected annual GDP
by sector in selected regions
Agriculture, mining
and quarrying
Business, trade and
public services
Manufacturing, utilities
and construction
Hotel, restaurants
and other services
Transport services
Overall GDP
Italy
France
Germany
Britain
Spain
U.S.
South Korea
Canada
Australia
India
China
World
-5
-4
-3
-2
-1
0%
SOURCE: IEA
Impact of each month of containment measures on expected
annual GDP by sector in selected regions
Agriculture, mining and quarrying
Business, trade and public services
Manufacturing, utilities and construction
Hotel, restaurants and other services
Transport services
Overall GDP
Italy
France
Germany
Britain
Spain
U.S.
South Korea
Canada
Australia
India
China
World
-5
-4
-3
-2
-1
0%
SOURCE: IEA
According to the IEA, road transport in regions under lockdown has dropped by 50 per cent to 75 per cent. The IEA cited data from navigation device maker TomTom that shows peak mid-March traffic congestion was cut in half in cities, including Istanbul, Los Angeles, Mumbai, India, Paris, Sao Paulo, Brazil and Toronto.
Air travel in certain regions has almost ground to a halt, with aviation activity in some European countries declining more than 90 per cent. As a result, jet fuel is the oil product with the largest demand decline relative to 2019.
The IEA expects only a gradual oil recovery in the second half of 2020 as economies come out of containment and activity levels rise.
Projected change in primary energy
demand by fuel in 2020 relative to 2019
Total
energy
demand
Renewables
Nuclear
Oil
Gas
Coal
-10
-8
-6
-4
-2
0
2%
SOURCE: IEA
Projected change in primary energy
demand by fuel in 2020 relative to 2019
Total
energy
demand
Renewables
Nuclear
Oil
Gas
Coal
-10
-8
-6
-4
-2
0
2%
SOURCE: IEA
Projected change in primary energy demand
by fuel in 2020 relative to 2019
2%
0
-2
-4
-6
-8
-10
Total energy
demand
Coal
Gas
Oil
Nuclear
Renewables
SOURCE: IEA
Nonetheless, it said demand is unlikely to reach precrisis levels before the end of the year, with December demand projected to be down by 2.7 million barrels a day year-on-year.
As for what the Canadian oil patch could see on the other side of the pandemic, Dr. Birol expects consolidation in the energy market as private companies most exposed to market prices experience “severe financial impacts.”
Rate of change in global primary
energy demand, 1900-2020
Spanish flu
30%
Second
World War
First oil
shock
Financial
crisis
Great
Depression
20
Second
oil shock
10
0
-10
PROJECTION
-20
1900
1920
1940
1960
1980
2000
2020
SOURCE: IEA
Rate of change in global primary
energy demand, 1900-2020
Spanish flu
30%
Second
World War
First oil
shock
Financial
crisis
Great
Depression
20
Second
oil shock
10
0
-10
PROJECTION
-20
1900
1920
1940
1960
1980
2000
2020
SOURCE: IEA
Rate of change in global primary energy demand, 1900-2020
30%
Spanish flu
Second
World War
First oil shock
Financial
crisis
Great
Depression
20
Second
oil shock
10
PROJECTION
0
-10
-20
1900
1920
1940
1960
1980
2000
2020
SOURCE: IEA
"I would expect the businesses that are insulated from market signals, such as renewable electricity projects, will emerge in the best financial position,” he said.
Using a model where months-long restrictions on mobility, social and economic activity cause a widespread global recession, the IEA expects energy demand to contract by 6 per cent this year – the largest crash in history in absolute terms, and more than seven times larger than the impact of the 2008-09 financial crisis on global energy demand.
If efforts to curb the spread of the coronavirus that causes COVID-19 and restart economies are more successful, the agency expects the decline in energy demand to be limited to under 4 per cent.
“However,” it notes, "a bumpier restart, disruption to global supply chains, and a second wave of infections in the second part of the year could curtail growth even further."
The silver lining is the world will likely see its largest ever drop in carbon dioxide emissions this year.
They’re projected to fall by close to 8 per cent – almost 2.6 gigatonnes – to levels seen a decade ago. That reduction is six times larger than the previous record caused by the global financial crisis, and twice as large as the combined total of all previous declines since the end of the Second World War.
The premature deaths and economic trauma that caused the fall are nothing to cheer, Dr. Birol said. However, he acknowledged the crisis will form a framework for important decisions around economic recovery.
“It is the best time for governments to give a shape to their economic recovery packages, which has clean energy technologies included,” he said.
With renewables the only energy sector to experience growth in the face of the contagion, Dr. Birol said governments should include energy efficiency, green technology, carbon capture and storage, and small-model reactors for nuclear in their economic stimulus packages.
“This will definitely be a good way to go on a sustainable future,” he said.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.