JUNE 2020 IN
RICK ASTER’S WORLD
Statistics had long shown that the U.S. commuter category was burning the largest share of the global oil market. That effect is now confirmed by wild fluctuations in the U.S. spot market for oil since pandemic precautions have prompted more than half of U.S. commuters to work from home or stop going to work.
Lower gasoline prices in North America will prompt some drivers to postpone purchases of electric cars, but vehicle purchases of all kinds are being postponed right as many people and their cars stay put for the moment.
I recently went three months between gasoline purchases for the first time since I got my first car. My driving has not added up to much distance, and that also means there has not been much wear and tear on the car.
For those who are continuing to drive, the lighter traffic means fewer opportunities for collisions, so that those cars may last longer also.
With lighter demand for cars, manufacturers are canceling some model year upgrades and some entire models. It isn’t a promising time for investments in engineering for fuel-burning cars. Engineers are freed up to focus on more current technology, and this can only accelerate the transition to electric cars. The year before the pandemic, then, may stand as the all-time high for oil demand.
Travel is another factor in oil consumption, and though it is too early to guess how well travel will come back, it is safe to say, that will not happen soon.
Shopping, agriculture, and manufacturing are other fuel-burning activities that have been disrupted by the abrupt changes in consumer patterns. Slowdowns in these categories add to the short-term shortfall in oil demand. But as much as 10 percent of the decline could be permanent.
The reduction in fuel consumption has not been nearly enough to stop global warming, but the perils of global warming and the related problem of plastic pollution are becoming clear to more people. As consumers look for ways to reduce consumption of fuels and plastics, this too will chip away at demand for oil.
Fuel stations have been able to pay the rent during this period of lower demand by increasing their markup. Eventually, though, more fuel stations will have to close as more fuel-burning cars are replaced by electric cars.
After the pandemic is over, the number of workers returning to the office will be lower. Millions of jobs have been permanently eliminated. Whole companies are switching to work-from-home plans and are even selling their office buildings. As the pandemic winds down, the level of oil consumption may not go up by much. The trend of burning less oil is here to stay.
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