End Game for Oil?

The coronavirus crisis may have triggered the long-anticipated tipping point in oil demand and it is focusing minds in OPEC.
According to Reuters, the pandemic drove down daily crude consumption by as much as a third earlier this year, at a time when the rise of electric vehicles and a shift to renewable energy sources were already prompting downward revisions in forecasts for long-term oil demand.
It has prompted some officials in OPEC, oil’s most powerful proponent since it was founded 60 years ago, to ask whether this year’s dramatic demand destruction heralds a permanent shift and how best to manage supplies if the age of oil is drawing to a close.
“People are waking up to a new reality and trying to work their heads around it all,” an industry source close to OPEC told Reuters, adding the “possibility exists in the minds of all the key players” that consumption might never fully recover.
Reuters interviewed seven current and former officials or other sources involved in OPEC, most of whom asked not to be named. They said this year’s crisis that sent oil below $16 a barrel had prompted OPEC and its 13 members to question long-held views on the demand growth outlook.
Just 12 years ago, OPEC states were flush with cash when oil peaked above $145 a barrel as demand surged. Now it faces a dramatic adjustment if consumption starts a permanent decline.