COVID19 pandemic drove down daily crude consumption by as much as a third earlier this year, at a time when the rise of electric vehicles and a shift to renewable energy sources were already prompting downward revisions in forecasts for long-term oil demand. It has prompted some officials in the Organization of the Petroleum Exporting Countries, oil’s most powerful proponent since it was founded 60 years ago, to ask whether this year’s dramatic demand destruction heralds a permanent shift and how best to manage supplies if the age of oil is drawing to a close.
This year’s crisis that sent oil below $16 a barrel had prompted OPEC and its 13 members to question long-held views on the demand growth outlook. Just 12 years ago, OPEC states were flush with cash when oil peaked above $145 a barrel as demand surged. Now it faces a dramatic adjustment if consumption starts a permanent decline. The group will need to manage even more closely its cooperation with other producers, such as Russia, to maximize falling revenues and will have to work to ensure relations inside the group are not frayed by any fratricidal dash to defend market share in a shrinking businesses. This trend will put a stress on the cooperation between OPEC members, as well as between OPEC and Russia, as each strives to maintain its market share. Some short-term challenges may come from within OPEC, as Iran and Venezuela, hit by U.S. sanctions, seek to boost production or as output recovers in conflict-stricken Libya. Others may come from outside, as the group tries to prevent U.S. shale production taking market share while OPEC seeks to curtail output in its efforts to support prices.