26.05.202010:13 Forex Analysis & Reviews: The IEA chief forecasts low oil prices to return demand for oil to pre-crisis levels

"Oil consumption has not reached its highest levels," revealed Fatih Birol, head of the International Energy Agency.

"Due to soft government policies and low oil prices, global demand for oil will return to its pre-crisis levels in the near future," he added.

The global oil consumption last year amounted to nearly 100 million barrels per day. Some representatives of energy industries suggest that this figure could be the highest level of global demand, but the quarantine made it impossible to be reached, since remote work will become the norm and travel abroad will decrease, which leads to reduced consumption.

Such a situation will lead to climate change as well, because burning oil will reduce greenhouse gas emissions, thus, decreasing the chances of achieving the goal of the Paris Climate Agreement. However, Birol informs that quarantine will only reduce oil demand for a short time. Presumably in 2020, consumption will drop to 91 million barrels per day, but by 2021, it will gradually recover and increase further.

Birol also listed alternative options in fighting climate change. According to him, the government can resort to using solar energy to achieve the goals set in the 2016 Paris Agreement.

"In the event of a rapid economic recovery, business consultants in the US who use 'Zoom' will not be able to replace 150 million urban residents in Africa and India, who are traveling, working in factories and buying products that are transported by truck," Birol said.

Birol also compared the current situation with the crisis observed in 2008-2009, during which an identical decline in oil demand was recorded. The economic recovery programs back then were not focused on solar energy, so the opportunity to solve the problems of climate change was missed.

In a report published in November 2019, the IEA estimates that demand for oil will increase over the next decade. By 2030, global oil consumption will reach about 105 million barrels per day, and by 2040, about 106 million.

The IEA also sees significant oil savings from the sale of new cars over the next two decades.

The usage of more efficient engines will reduce demand by 9 million barrels per day, while increasing the number of electric vehicles will reduce about 4 million.

However, with the current economic crisis, sales of new cars are very unlikely, so less efficient cars will most likely remain on the road.

"A decrease in car sales means that old-style cars remain on the road," Birol said. This means that we will not achieve the Paris Agreement of 2016, and oil consumption will return to its previous figures.