Longer time seen for oil demand to reach pre-Covid-19 level
Avoid public transportation by using your own car, which increases the demand for gasoline or diesel consumption!
Avoid going to the office by working from home… reduce the demand for petrol or diesel!
These were the norms during the past year, and continuing even now, and it may go on like this even in the future.
Although the net effect will not be known until months and perhaps years from now, using a private car to go to work will decrease as coronavirus cases recede and most people are vaccinated against it.
The reason for this is that the cost of using a car in large cities in Europe and the United States in particular is high, due to the costs of public or private parking, if available, in addition to the highway costs that impose fees for their use.
The problem for oil producers is the current trends of working from home.
Many companies have decided to abolish their headquarters altogether, so that all their employees work from home, while others have reduced their office space and capacity for the same purpose.
At a time when work in the office will be cancelled for some professions completely, these companies decided that working in the office would be allowed only for two or three days, while some companies limited these to one day only.
According to Global Workplace Analytics, the proportion of people working from home a few days a week in 2018 was about 3.6% of all employees.
This percentage will reach 25 or even 30 by the end of this year!
According to a survey conducted by Gallup in March and April 2020 in the United States, three out of five employees said they would prefer to work from home as much as possible even after the end of the Covid crisis.
Data indicates that the average commute to work in the United States is about 45 minutes, in Europe it is 50 minutes, and in Japan 30 minutes.
Saving this time means using it for other things more beneficial than driving a car to work.
There are many other benefits for employees.
As for companies, many of them found that the productivity of their employees increased when they work from home, at the same time when companies achieve significant savings in terms of offices and variable costs such as electricity, water, heating and air conditioning.
A study by Stanford University of 16,000 employees indicates that productivity increased by about 13% on average thanks to their working from home.
The same study reveals that the rate of employee absence decreased, even for sick reasons, which is one of the things that increased productivity.
Google announced that its employees, who number about 200,000, can work from home until July of this year, after which it will assess the situation again.
On the other hand, companies such as Facebook and Twitter announced that they would allow their employees to work from home without specifying any period, even if the virus is contained.
As I was writing this article, the British oil company BP announced austerity measures requiring its employees to work 40% of the time at home, which is equivalent to two days a week; and this applies to about 25,000 employees, 6,000 of them in Britain alone!
As of last month, more than 50 well-known companies announced that they would adopt a permanent home work policy.
These regulations involved banks, insurance companies and a large number of technology companies.
The companies differ among themselves in terms of work-from-home policies.
Meanwhile, oil markets are currently suffering from an “oil demand trap”, which has prevented the global demand from returning to what it was before Covid-19.
The “oil demand trap” means that there is a quantity that will not be requested due to fear of contagion, and it has nothing to do with prices, derivatives and income.
The demand for auto fuel will decrease by about one and a half million barrels per day.
Globally, the number could reach a maximum of 4mn barrels per day.
According to the latest Opec forecast on global oil markets, the average demand for oil in 2021 will reach 96.1mn barrels per day.
This average is lower than the average demand for oil in 2019, pre-Covid-19, by about 3.8mn barrels per day.
If we believe that working from home will remain a major phenomenon in the post-coronavirus period, the road to 100mn barrels per day will be more difficult than many believe, and this decrease in demand for oil resulting from home work will always remain.
This means that reaching 100mn barrels per day will take longer, and it will come from other parties at the level of sectors or people.
In sum, the spread of coronavirus has caused some employees to use their own cars at the expense of public transportation to go to work or to fulfil their own needs, which raised fuel consumption relatively, but on the other hand, many worked from their homes, which reduced car fuel consumption.
This indicates that the return of oil demand to pre-Covid-19 levels will be more difficult and take a longer period than anticipated earlier.
n Saad Abdulla al-Kuwari is an expert in oil and gas and is exploring the future of energy.
Source: Gulf Times