A familiar narrative has gained traction in the wake of the oil demand shock brought on by the coronavirus pandemic. According to one pundit, “The inexorable decline of oil has begun.” Reports that “the world may never recover its thirst for oil” have been widely echoed as well.
But the reality of oil’s future is much brighter than that rhetoric would indicate. In fact, International Energy Agency head Fatih Birol recently noted that low oil prices and sustained economic recovery “are likely to take global oil demand back to where it was, and beyond.” You read that right — the IEA is forecasting global oil demand will not only rebound to its previous pre-coronavirus level of 100 million barrels per day but increase to about 105 million barrels per day over the next decade.
The world is quite simply going to need a lot of oil for a long time to come. And it is much more ideal to produce as much of it as possible here in Illinois and throughout the United States than to rely on hostile nations to meet the demand for this essential commodity.
Signs that oil’s obituary have been drafted prematurely are already prevalent. Oil prices rebounded 88% in May, surprising many market analysts who predicted prices would again go negative like they did in late April. Instead, global demand has bounced back faster than expected as countries have eased COVID-19 restrictions. Perhaps most tellingly, Chinese oil demand is all but back to levels seen before the world’s largest oil consumer imposed a national lockdown to combat the virus. A prominent Russian oil minister has even said that global oil supply and demand could be rebalanced by the end of this month.
These trends are evidence that the recent dramatic decline in oil consumption caused by COVID-19 stay-at-home restrictions represents more of a blip rather than a seismic change that so many speculated was occurring. Despite the oil and gas industry’s undeniable lack of popularity, the world continues to consume copious quantities of energy, a vast majority of which is provided by petroleum. Experts agree these consumption trends are unlikely to change any time soon.
The U.S. Department of Energy (DOE) reports that fossil fuels — primarily oil and natural gas — will likely meet 79% of our energy needs in 2050. That represents just a one% decline from fossil fuels’ energy consumption share last year.
As Baker Institute energy geopolitics fellow Jim Krane recently noted, “Oil is still the only game in town when it comes to moving around the planet. Until that changes, we are going to be using it.” But oil is also used for whole lot more than getting from point A to point B. In fact, 75% of global oil demand is non-gasoline and demand for petroleum-based products is projected to be the biggest driver in global oil and natural gas demand in the coming decades. There are roughly 6,000 petroleum products that we use every day, including a myriad of products that are absolutely essential to the healthcare industry and the clean energy transition environmental activists are pushing for.
Petroleum-based products -including artificial hearts, pacemakers, face masks, gloves, monitors and ventilators — are used by the healthcare industry to literally save lives. It has been estimated that the average emergency room has 90 products derived from oil and natural gas, while 80 to 90% of pharmaceuticals are made of petroleum.
The materials needed for renewable energy infrastructure also don’t mine and manufacture themselves — petroleum is needed. As the IEA recently noted, petrochemicals “are particularly important” because they “are required to manufacture many parts of the modern energy system, including solar panels, wind turbines, batteries, thermal insulation and electric vehicles.”
Oil demand may fluctuate in the decades ahead, especially during times of crisis. But there is no doubt that we are still going to need a lot of oil for a long time to come, which is why the “Keep It In the Ground” movement’s stated mission is one that is impossible for our country to abide.