Gasoline and diesel fuel demand has made a spectacular recovery since "black April" 2020 when it cratered under pressure from the COVID-19 pandemic, but it is still lagging by more than 5 million barrels per day. The "last mile" of the recovery in demand for transportation fuels has been uneven and tenuous, a new report issued by the International Energy Forum (IEF) concludes.
To better gauge energy demand recovery, IEF researchers analyzed the correlation between transportation fuel demand data from the Joint Organisations Data Initiative (JODI) with metrics from Google's Community Mobility Reports and the Oxford COVID-19 Government Response Tracker.
The report entitled: "Oil Demand Outlooks in Times of a Market Dislocation: Non-Traditional Metrics as a Bellwether for 5 Million Barrels Missing from Transportation Fuels Demand" employed mobility trackers to explain the demand trajectory of transportation fuels, a critical sector for oil demand that was disproportionately hit by COVID-related restrictions. The report was released Monday, 19 April 2021.
"While the recovery from the sharp demand drop in April 2020 until now has been impressive, the last mile for the demand recovery remains uneven and fragile," said H.E. Joseph McMonigle, IEF Secretary General. "These trackers along with other metrics can help model transportation demand, improving the transparency and timeliness of data."
In its monthly comparative analysis, the IEF reported a difference of 360,000 bd in the demand estimates of non-OECD countries – equivalent to the consumption of a country like the Philippines.
Transportation fuels demand is down 5.2 million barrels per day (mb/d) – 2.8 mb/d for gasoline and diesel and 2.4 mb/d for jet fuel – from pre-COVID levels, and could reach pre-COVID levels in 2022 on aggregate, the report found. The study covers more than 65 countries that account for more than 80 percent of global demand.
Oil demand fell by approximately 25 percent in "black April" to levels last seen in 2002. Since then, gasoline and diesel demand rebounded to about 93 percent of pre-COVID levels as of March 2021, up from 87 percent in January. Some 35 percent of the volume gains in those two months were driven by growth in the United States and India, according to the report.
"The drivers of growth and uncertainties have not really changed. What has changed is this increasing awareness of the divergent paths to economic recovery, the divergent paths for the management of the pandemic," said Dr. Leila R. Benali, IEF's Chief Economist.
While the US might be the only large economy to become larger in 2022 than the forecast in the absence of the pandemic, the rest of the world is increasingly divided by the pace of vaccine rollout, effectiveness of policy support and reliance of economies on tourism or informal sectors.
This uneven growth result in very different mobility patterns. For example, many European countries lag by 20-40 percent below the January 2020 baseline. The largest share of missing demand is jet fuel, and it is expected to remain at 5.5-5.7 mb/d in the first half of 2021 versus 7.9 mb/d in 2019. The expected disparity between regions and countries, a result of the various government responses to the pandemic, means domestic and regional airline flights are picking up slowly while long-haul flights, more than 30 percent of fuel used in aviation, show limited sign of recovery in the next two years. Experimentations of travel corridors are underway, and in parallel, commercial aviation is undergoing a deep restructuring.
Google's Community Mobility Reports are based on data from users who have enabled location history on a Google Map app. The index compares the daily number of users at different commercial locations to January 2020 baseline data.
The report also revealed that In China, Oxford's COVID-19 Government Response "Stringency" Tracker fell during March 2021 below summer 2020 levels. This implies a serious pick-up in transportation demand, especially considering passenger traffic in China had declined 45 percent during 2020.
Gasoline demand in the second half of last year exceeded the previous year in several key Asian markets including China, India, South Korea, Thailand and Chinese Taipei. However, North American demand lagged notably with gasoline consumption down 12-25 percent compared to the second half of 2019.
Analysis of these statistics also point to a surge in heavy industry consumption, particularly of diesel. CO2 emissions in China increased 1.5 percent in 2020.
At this stage, vaccination distribution is a weaker metric to extrapolate transportation fuels demand, and, therefore, oil demand recovery. The IEF plans to continue monitoring these different metrics during the remainder of 2021, particularly in relation to Ramadan and summer vacation travel patterns and the wider divergent economic recovery.
"Despite all the nuances and contingencies in the data, these non-traditional metrics are showing a very strong correlation with gasoline and diesel data," said Allyson Cutright, IEF Energy Analyst.
IEF demonstrates that the combination of these trackers with other metrics can help improve the relevance of data in modeling transportation demand, resulting in better information for supply and investment strategies.