Developing countries’ difficulty in containing the spread of the coronavirus pandemic will keep a lid on global oil demand, particularly in India, the OPEC cartel said Monday as it cut its forecasts.
OPEC cut its estimates for world demand by 400,000 barrels a day for both this year and next. It now sees a drop in demand of 9.5 million barrels a day in 2020 and a rise of 6.6 million barrels in 2021.
“Risks remain elevated and skewed to the downside, particularly in relation to the development of COVID-19 infection cases and potential vaccines,” the cartel said in a monthly report on the industry.
Beside the trouble in some developing countries, which together with the United States have had a harder time than Europe or China in limiting the first wave of virus contagions, OPEC said it expected a slow pick-up in energy demand for transportation in rich countries. Airlines around the world are flying only a fraction of their normal amount of traffic, with a full recovery not expected for another couple of years.
Tim McMillan, the president of the Canadian Association of Petroleum Producers, said there are a lot of scenarios that have oil peaking and flatlining.
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“Every prediction has the world using substantial amounts of oil and gas into the future, including BP, including OPEC and most certainly the International Energy Agency, so I think that Canada has a very positive role to play if we choose to,” he said.
“We are in a world where people aren’t flying, where we have constrained our lifestyles and we may choose to constrain our lifestyles into the future. But there are emerging economies in India and China where the use of oil and gas is putting people out of poverty.”
The price of oil plunged during the initial phase of the pandemic as businesses and transportation ground to a halt around the world. The uncertainty surrounding the industry, coupled with concerns about climate change, has pushed some major oil companies to shift more aggressively towards renewable energy or natural gas.
BP says it expects demand for crude oil to peak in the early 2020s. If governments become more aggressive about reducing carbon emissions, demand might never recover from the current slump, its said in a report on the industry’s outlook.
BP also predicts oil demand will fall dramatically over the next 30 years and renewable energy will drive consumer change.
Some energy industry insiders say it’s premature to suggest oil is dead.
“The point is what can the world afford post-COVID after all the money that’s been borrowed, after the high rate of unemployment?” energy analyst David Yager said.
“What the world really needs is the cheapest possible energy.”
Alberta Energy Minister Sonya Savage said oil and gas will dominate the energy mix for decades to come.
“That oil will come from somewhere, and if not Alberta, other countries like Russia and Saudi Arabia will increase their market share,” she said.
– With files from Global News’ Tomasia DaSilva