The Ebb and Flow of Oil Demand in a Post-Pandemic World

The height of the COVID-19 pandemic bore witness to empty streets and barren skies, with scarce traffic and contrails to crowd the ears and eyes. People were not traveling and using less oil as a result. 

Despite the global fear during this time, environmentalists took a breath and rejoiced at the reprieve the planet would get from transportation-related emissions. However, humans live in a mostly post-pandemic world, and oil is still part of the conversation. This is what energy professionals need to know about this chaotic industry after COVID-19.

What Happened to Oil at the Beginning of the Pandemic?

Many doors remained closed to the world throughout 2020. The isolation led to a catastrophic crash in the oil industry, which did more than stiff companies of expected profits. The societal and spending shift led to macroeconomic deviations, influencing everything from policy to social welfare. For a time, citizens were more concerned with staying safe than being out and about the town.

The excitement to go outside was palatable as the world opened up and vaccines became available. Worldwide, people traveled, using record-breaking amounts of oil to bring the world back into its new normal.

It also caused California prices to go above $4 for the first time since the pandemic started and inventories ballooned. However, the novelty is starting to wear off as numbers begin to level once again.

How Are Oil Trends in 2024?

Dips started becoming noticeable at the end of 2023, transferring into the new year. The International Energy Agency reported the numbers look similar to before the thick of COVID-19. The world used 2.3 million barrels of oil daily in 2023, with a more optimistic 1.2 million heading into 2024. 

Energy experts suspect the numbers were so egregious last year because of air travel and other transportation. This directly contradicts projections from the Organization of the Petroleum Exporting Countries (OPEC), which declares oil demand will remain similar to 2023 numbers and even increase in 2025. 

Its suggestions align with nations producing record output, including the U.S. and Guyana. OPEC has intentionally withheld distribution before to fix the market, so these statements are challenging to dispute without considering every element at play.

What Events and Actions Influence Oil Demand?

The post-pandemic world has new trends and historical events causing oil demand to ebb and flow. Here are a few top contenders trying to sway the market. 

Geopolitics

Geopolitical tensions are fiends for oil. The Russia-Ukraine, Israel-Hamas and Red Sea conflicts are several prime examples of how warfare drives oil demand. It is due to numerous factors, including scarcity escalating costs and citizens losing power and needing fuel for generators. Price fluctuations go beyond warfare, as actions like the U.S. ban on Russian oil imports and major exporters releasing reserves to control pricing have lasting effects.

China’s Petrochemicals

The petrochemical industry in China is spending so much money on renewable energy and EVs that it feels antithetical. It is not enough, given that 90% of China’s oil boom since 2021 is because of onshore petrochemicals like ethane, propylene and naphtha. It keeps the industry alive and well despite electrification and solar. 

China has found a way to keep oil relevant by extracting these feedstocks. Then, they invest this byproduct into lithium-ion batteries and solar panels, which the nation is known for producing more than most of the world.

Consumer Trends

Consumer spending behaviors are another influence. Consider how financial stability warrants more leisure travel and trips out and about to shop. Prominent banks are slashing interest rates, which analysts suspect will drive oil demand. 

However, buyers have adopted numerous new financial behaviors from inflation and strict, excessive bank rates. Frugality is on the rise and hyperconsumerism — albeit rampant — is reaching mainstream awareness for how toxic it is to mindsets and the climate. Therefore, interest rates may spike oil demand, but social shifts could ignore it.

Electrification and Charging Infrastructure

EVs are at the height of their career and trajectories should remain positive as long as legislation keeps manifesting globally. EV sales are soaring as the U.S. hit one million sales at the end of 2023 with a 50.7% year-over-year increase. 

This surprising statistic makes sense alongside expanding charging infrastructure to remove range anxiety from consumers. Charger convenience and concentration will correlate with internal combustion engine obsoletion. Tax incentives compound with manufacturers’ shifting priorities, making EVs one of the most significant threats to oil demand in history.

How Can the World Curb Oil Reliance to Bring Numbers Down?

The best way to eliminate oil demand is a systemic overhaul. Citizens and companies need it because it is the social norm and is required for most mandatory consumer products and operations. Decreasing production requires redrafting the most significant oil guzzlers with a fossil fuel-free design. 

Then, this option must become less expensive and more market-viable than dependable gasoline. Even renewable energy products need oil or its feedstocks in current manufacturing. The transformation begins by targeting the most carbon-intensive sectors, like transportation and buildings.

Why not just stop the world’s leading nations in oil supply? Though it is a finite resource, there is still a lot to go around. The implication is even if the U.S. and China run away from production, other countries with the infrastructure will assume the burden. This is why oil demand must start from within industries, designing out fossil fuel reliance so companies and nations have no incentive to capitalize on the rest of the world’s stores.

Organizations need external motivation to push for this monumental change. Legislative action is the only way to provide accountability and pressure. A federal law forcing oil out would be like a safety blanket for businesses that need it the most — they need to know they will still be in operations once they fulfill their side of the deal in creating oil-free products. Therefore, the root of driving down oil demand is personal and corporate advocacy and international cooperation and inspiration.

Oil’s Hectic Year

Wars could cease and begin. A new EV manufacturer may catch a sales windfall after combating supply chain shortages. Buyers could also walk back to the comforts of ICEs and stay there for the next decade. 

Energy professionals have analytics to suggest what oil demand and prices might look like by the end of 2024, but too many unknowns could still be game-changing. There are more impacts on oil than ever, pressuring the industry to innovate or fade into obscurity as the climate revolution continues.