Publications: Notes at the Margin

Resurgent Oil Consumption: Real or Imaginary? (August 24, 2020)


Forecasters see global oil demand recovering by year’s end. The most recent and widely quoted International Energy Agency forecast puts December 2020 global oil use close to December 2019 levels. Likewise, Saudi oil minister Prince Abdulaziz has said that "global oil demand should recover to pre-pandemic levels as soon as the fourth quarter of 2020."[1] In contrast, the US Energy Information Administration mentioned little regarding the recovery in its August forecast. Still, its projection shows global oil use in December just 3.5 percent below the December 2019 estimate. The consulting firm Rystad Energy is more conservative, projecting a deficit of around six percent for December compared to 2019.


Whatever their differences, all forecasts show a "swoosh" recovery, which mimics the shape of Nike’s famous logo. Using the EIA forecast as an example, global consumption in August 2020 is projected to be almost eight million barrels per day below the August 2019 level. The EIA projects half of that gap to close by December. This outlook appears to be the consensus among those who focus solely on oil supply and demand.


These views could be very wrong, however, because the forecasts of those concerned with the coronavirus’s economic impact—some of whom probably have no clue as to how many gallons a barrel contains—warn of more trouble in the fall. An increase, possibly severe, in Covid?19 infections and deaths could sharply reduce economic activity, dragging down oil consumption in all parts of the world. The economic fallout and oil use reduction in the United States could be particularly egregious because of our chaotic, disunified, and often conflicting approaches to combatting the disease.

[1] Rania El Gamal, Alex Lawler, Olesya Astakhova, “OPEC+ presses for compliance with oil cuts,” Reuters, August 19, 2020 [].


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