Why the death of oil has been much exaggerated
There was a certain inevitability that the coronavirus pandemic and its associated lockdowns would revive the claims that the oil era is all but over.
There is no doubt that the coronavirus was, and indeed remains, a massive shock to the global economy. It has led to a rethink of almost everything we do — including how we consume energy. But this does not mean the need for oil will disappear overnight.
The Economist was among the publications exploring this theme in recent weeks. It is familiar territory for the newspaper that first heralded “The End of the Oil Age” back in October 2003. Seventeen years later, the claim is no less tenuous.
That feature began with what has since become a much-quoted line from a former Saudi energy minister Sheikh Zaki Yamani, who said: “The Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil.”
It is still questionable that peak oil demand is close and it is still unproven that we have already passed that point. The subdued demand for oil that has accompanied the great hiatus will eventually recover.
Let’s not forget that oil prices have been stable for more than two months with Brent hovering never too far away from the $40 marker. With such volatility everywhere else, across assets and economies alike, that feels remarkably stable.
That is partly explained by the fundamental truth that with or without the COVID-19 coronavirus, the world still needs oil — and will carry on needing it for many years to come.
The coronavirus was undoubtedly a violent shock to the global economy and it is changing the way the world works. But it is unwise to extrapolate too much from that without the evidence to show that the oil age is indeed over as many would now have us believe.
• Faisal Faeq is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalfaeq.