Oil demand seen back to pre-pandemic level by yearend
MANILA, Philippines — Oil demand is poised for rebound to pre-pandemic level by yearend buoyed by more people going outdoors as the economy comes out of strict quarantines, the energy department said on Tuesday.
“We are looking at maybe going to normal conditions by end of the year,” Energy Undersecretary Donato Marcos told senators hearing the agency’s budget for next year.
Sought for more details, Rino Abad, director of oil industry management bureau, said in a Viber message projections of better oil demand hinge on the “gradual relaxation of the quarantines” in the latter part of the year.
Lockdowns from March to June suspended commercial businesses and public transport, which inevitably shrank demand for petroleum this year. Collectively, the two sectors accounted for 61.4% of typical fuel demand as of last year.
Latest energy data showed aggregate oil demand shrank 22.9% to 10.8 billion liters as of first half from 14 billion same period a year ago. Abad said third-quarter data is due for release later this month, where oil take-up likely gained some lost ground.
There may be some basis to this. Car sales jumped 37% in September from August to hit their highest level since February, signaling more vehicles would require fuel to run apart from public transport that is slowly getting restarted.
Sought for comment, Fernando Martinez, chair of the Independent Philippine Petroleum Companies Association, an industry group, agreed a pick-up in oil demand is happening, but a normalization remains uncertain. “The entire transport, logistics, schools and private businesses all normalize...that's the only possible way oil demand will also come back to pre-pandemic level,” he said in a Viber message.
Emilio Neri Jr., lead economist at Bank of the Philippine Islands, agreed with Martinez. “There is some pent-up demand but the likelihood that we will see demand return to pre-pandemic level on a sustained year-on-year basis still looks low at this point,” he said.
“The reason is while more mobility has been allowed and e-commerce takes up some slack, a high degree of consumer cautiousness will likely remain and keep overall demand below 2019 levels,” he said in an e-mail.
For the broader economy, lower oil consumption means lower import costs and fuel prices. The Philippines imports around 80% of its annual oil requirements, and movement restrictions to control the spread of coronavirus this year helped cut that rising oil dependence.
From January to August, government data showed shipments of minerals, fuels, and lubricants plummeted 45.2% year-on-year to $4.87 billion. Separate energy data showed gasoline prices were down P4.42 a liter, while diesel costs were reduced P10.26 per liter as of October 13.
Tempered oil imports are also contributing to the peso’s strength against the US dollar. The local unit has so far gained 4.6% against the greenback this year.
World oil demand down, too
Globally, the International Energy Agency, a think tank, said depressed oil demand for the remainder of 2020 is likely to benefit the climate. “Since most carbon-intensive fuels, coal and oil, are bearing the brunt of this demand reduction, and renewables are least affected, CO2 emissions are set to fall nearly 7%,” IEA said in its latest report released Tuesday.
But at the same time, the agency cautioned against celebrating this expected environmental gain. “The economic downturn has temporarily suppressed emissions, but low economic growth is not a low-emissions strategy – it is a strategy that would only serve to further impoverish the world’s most vulnerable populations,” Faith Birol, IEA executive director, was quoted as saying.
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