It will take a while before governments certify it, but every piece of data points in the very same direction: In the past few weeks, global oil demand has surpassed the monthly peak set in 2019 before the Covid-19 pandemic.Expressed in barrels a day, the fresh record high in global oil consumption totals about 102.5 million, likely hit in the last few weeks in July and above the 102.3 million of August 2019. Picture this: We use enough crude to fill about 6,500 Olympic-size swimming pools every day. More than a third of those swimming pools would be needed to quench the thirst of two countries: the US and China.It’s not unexpected. The International Energy Agency, which compiles benchmark supply and demand statistics, has anticipated it for months. It was just a question of timing, since oil demand surges during the northern hemisphere summer, when millions of European and American families guzzle gasoline and jet fuel during their holidays. The wholesale cost of refined products, such as gasoline, is surging too.
Granted, the new demand milestone is just one flimsy data point. Global oil consumption statistics are routinely revised, and a final figure probably won’t be set in stone until next year, or even 2025. The margin of error is relatively wide, too, probably at least 1 million barrels a day. But experience indicates that demand is typically revised higher, rather than lower.
So far, we have only partial numbers for May and June, and directional evidence for July. Extrapolating from earlier this year, the fresh information, including real-time traffic congestion in multiple countries and global airline travel, suggests that global oil demand went above the pre-Covid peak recently, even when considering the margin of error.
We do have much better information for the January-to-April period. Global oil demand averaged 100.8 million barrels a day during the first four months of 2023, above the same period in 2019, when the average was 99.9 million, according to my calculations based on monthly data from the IEA.
Ironically, gasoline, the fuel that’s first to suffer from the rise of electric vehicles, is playing a leading role boosting demand. Only a few months ago, the conventional wisdom said that 2019 marked the peak in gasoline consumption. Now, it increasingly looks like gasoline demand will — at the very least — match the pre-pandemic high.
Gasoline is benefiting from three factors: Even with the boom in electric cars, the absolute number of gasoline-powered cars is still increasing; consumers are holding onto their vehicles longer, delaying the improvement that comes with newer and more fuel efficient models; and in Europe, consumers have swapped their diesel cars for gasoline ones, giving the latter an unlikely boost. The IEA has called the recent surge in gasoline consumption a “swan song” – perhaps, but the fuel’s obituary has been written before.
No matter what happens next with autos, what’s clear is that under current trends, global oil demand will increase a further 3% to 4%the next five years, before settling at a high plateau. For now, there’s no sign that consumption will drop off a cliff any time soon.
I’d like to be proved wrong, but currently there’s no chance that the world will reduce oil consumption by 2030 nearly as much as needed to meet its net-zero emissions targets. And that’s why many Western governments, while preaching green in public, in private tell oil executives to keep investing in more production.
(Opinion by Javier Blas)
