BAKU, Azerbaijan, Oct.22
By Leman Zeynalova – Trend:
Behavioural changes brought about by COVID-19 may translate into a permanent shift lower in oil demand in developed economies and accelerate existing downward trends in oil consumption per capita, Trend reports citing Capital Economics, UK-based research and consulting company.
“Admittedly, such moves will not be uniform across developed economies as some countries, including Canada and the US, may shift away from oil more slowly, given their rising populations, lower retail fuel prices and large oil industries. But in the EU, oil consumption will probably contract at a faster rate than would have been the case pre-virus, given the various government subsidy schemes for EVs, as well as commitments to net-zero carbon emissions by 2050. And while the US alone consumes 30 percent more oil than Europe, we still expect overall oil consumption growth in developed economies to decline in the years ahead. Elsewhere, oil demand in the emerging world has been consistently rising in recent years. And, since 2013, oil consumption in non-OECD economies has been higher than in the OECD.
“Although we still believe that non-OECD oil demand will continue to grow until the early 2030s, we think that the rate of oil consumption growth is likely to weaken for two main reasons. First, we expect that China’s economic growth will slow rapidly by the end of this decade as policymakers show little appetite for the reforms necessary to enhance productivity growth.
“What’s more, we think COVID-19 has made this medium-term slowdown even more probable given the state’s expanding role in the economy, even though policy stimulus has improved the short-term outlook. The expected slowdown is consistent with a significant decline in oil consumption growth in the years ahead. In addition, our forecasts assume that China remains a middle-income country, which suggests that China’s oil consumption may level out in the years ahead. Second, it looks as though COVID-19 will have added to the headwinds facing many other emerging economies in the medium term. For example, we think that the virus has accelerated the onset of deglobalization.
“And as emerging economies were the main beneficiaries of globalisation in the 1990s and 2000s, these same economies are likely to be hardest hit in the medium term. In addition, the potential move towards poor policy responses, such as severe financial repression in certain large emerging economies, including Brazil, South Africa and India, will result in the further misallocation of resources. Among other factors, these will act as a handbrake on EM oil consumption growth in the years ahead,” said the company.
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