The demand for oil and gas has gradually increased each year since the COVID-19 pandemic began in 2020. Oil and natural gas are needed in every major industry on the planet; however, the overall demand for these commodities has been altered due to the global crisis.
Massive changes to supply and demand
The COVID-19 pandemic resulted in widespread shutdowns of oil and gas companies around the globe. In 2020, the worldwide demand for oil fell by approximately 30 million barrels per day, according to the International Energy Agency (IEA). Meanwhile, the supply of crude petroleum increased by 535.2 million barrels.
By April, the Organization of the Petroleum Exporting Countries (OPEC) raised the production of barrels to 1.7 million, which totaled 30.4 million barrels per day. This was the largest increase in production since 1990. Saudi Arabia increased their production to 12.3 million barrels per day.
COVID-19 resulted in a significantly reduced need for gasoline that was lower than that of the need for other types of refined petroleum. The demand for gasoline decreased by 3.5 million barrels per day, which was the lowest rates in over 50 years.
Due to the world’s dramatically reduced demands and increased supplies of oil and gas, prices plunged. By April 2020, crude petroleum was being marketed at negative prices. The Producer Price Index (PPI) for crude petroleum fell 71%, which were the largest declines in production prices since 1991. In the U.S., the Import Price Index for crude petroleum plunged by 62.8% by April.
Predictions for 2021
The ongoing problems with COVID-19 led to a slower recovery by the end of 2020. The IEA and OPEC had to change their previous assumptions and restate that the worldwide demand for petroleum is expected to decline by 2021. The OPEC predicts that the world’s demand for oil will exceed the 2019’s demand in 2022.
The demand for fuel has decreased significantly since the beginning of the COVID-19 pandemic in 2020 due to state-and-federal-mandated stay-at-home orders and worldwide travel restrictions. As a result, there was an overproduction of crude oil and price wars that resulted in significant PPI declines of the PPIs. While the demand for oil and gasoline declined in April 2020, experts predict that this demand will increase in 2022.