Daily Management Review

OPEC Considering For An Era Of Declining Global Oil Demand: Reports


OPEC Considering For An Era Of Declining Global Oil Demand: Reports
Minds in Organization of the Petroleum Exporting Countries (OPEC) are focusing on a probably tipping point got global oil demand which may have been triggered by the novel coronavirus pandemic.
Earlier this year, travel restrictions and lockdowns imposed to prevent the spread of the pandemic drove down daily crude consumption by as much as a third. And this even occurred at a time when a rise of electric vehicles and a shift to renewable energy sources was already being witnessed. These developments had already prompted a downward revision of long term oil demand forecasts
The current situation in the global oil consumption and demand has prompted some officials in the OPEC to discuss whether a permanent shift in oil consumption patterns has been heralded by this year’s dramatic demand destruction and the best methods of supply management if the age of oil was nearing its end.
“People are waking up to a new reality and trying to work their heads around it all,” according to a report published by Reuters quoting an industry source close to OPEC. The sources added: the “possibility exists in the minds of all the key players” that consumption might never fully recover.
Long term views on the demand growth outlook, that have been followed for a long time, for oil was forced to be reconsidered by 13 members of OPEC as the price of oil was pushed to $16 a barrel because of the crisis this year, said reports. 
With oil peaking above $145 a barrel as demand surged, OPEC states were flush with cash just 12 years ago.
Those very oil producing countries face the need for a dramatic adjustment if a permanent decline in oil consumption has already begun. In order to maximisze falling revenues, its cooperation with other producers, such as Russia, will have to be managed even more closely by the group. The oil producers and OPEC will also have to ensure steady relations within its member countries and avoid strained relations. 
“OPEC’s job will be harder in the future because of lower demand and rising non-OPEC production,” said Hasan Qabazard, OPEC’s head of research from 2006 to 2013 whose work now includes advising hedge funds and investment banks on OPEC policy.
Permanent changes in consumer behavior in the past had been caused by shocks to oil demand, an official working in energy studies in the oil ministry of a major OPEC member was quoted in a Reuters report as saying. Things this time will also likely be the same, he said.
“The demand does not return to pre-crisis levels or it takes time for this to happen,” he said. “The main concern is that oil demand will peak in the next few years due to rapid technological advances, especially in car batteries.”
There has been no comment available from OPEC about its demand outlook or policy with respect to the current market situation.