The oil, gas and chemical industries have always been quick to respond to macroeconomic changes. Demand for these three products is therefore an important indicator for economic development. Vice versa, the market for oil and chemicals is heavily influenced by socio-economic trends. While the impact of Covid-19 on the global economy obviously is enormous, there are also other key factors to consider when creating a market outlook for the oil and chemical industry. In this blog, we share our predictions regarding changing supply/demand imbalances in liquid bulk and their impact on the storage markets.

Electric vehicles on the rise

Over the past few years, the market for electric mobility has seen incredible growth. In 2019, the global electric car fleet exceeded 7.2 million, up 2 million from the previous year. With more and more electric car models being introduced to the market and charging infrastructure improving, this strong growth is only expected to increase. The IAE estimates that by 2030, there will be over 250 million electric vehicles (excluding three/two-wheelers) on the world’s roads. According to the IEA, the projected growth in the Sustainable Development Scenario of electric vehicles would cut oil products by 4.2 million barrels/day. (source)

Effects of lockdowns on fuel consumption

When we zoom in on North-Western Europe, the market outlook for the oil and chemical industry is poised to see some significant shifts over the coming years, especially regarding fuels. The ongoing move to sustainable energy sources aside, the demand for road and jet fuels has, of course, been strongly influenced by the ongoing Covid-19 pandemic. While the short-term effects of national lockdowns on demand for fuels are relatively straight-forward (fuel consumption is strongly linked with people’s mobility patterns), it will be the longer-term effects that are the most interesting to keep an eye on.

The ‘new normal’

Any economist will tell you that human behavior is notoriously hard to predict. Still, experts agree that the pandemic most likely will lead to a subtle yet noticeable shift in consumer behavior and travel habits.

Large corporations like banks, IT companies, and insurers are already preparing for a ‘new normal,’ where their staff will work more from home after Covid-19 than they did before. While the technology and infrastructure for remote working have already been in place for the past few years, both office workers and their employers have now experienced that it is possible to work from home at a large scale. Online meetings via Teams or Zoom have shown to be viable alternatives for in-person meetings. That’s not to say that face-to-face meetings at an office have become a thing of the past, but the advantages of online meetings have become more apparent.

As it could be that people will commute less to their offices, a decline in overall car traffic volume is expected. Together with the ongoing electrification of road vehicles, we expect that the current surplus for gasoline will increase further. When we take a look at diesel consumption, reversed dieselization of passenger cars will lead to a faster decline than we will see for gasoline. That being said, because the electrification of trucks is not expected to happen in the coming years, there will still be a large volume of diesel consumption left. 

While the positive experiences with online meetings now offer a financial impulse for reducing business air travel, it’s currently difficult to forecast if people will fly for private purposes as much after Covid-19 as they did before. Nonetheless, the longer the pandemic drags on, the more significant its long-term impact on aviation will be. That’s why for jet fuel, we forecast that the current deficit for North-Western Europe will grow at a slower pace.

What’s next?

It is clear that the transition to sustainable fuel sources will greatly impact the tank storage terminals. The market outlook for the oil and chemical industry will see significant shifts in supply and demand, while the Covid-19 pandemic only adds further complexities to the market. That’s why market intelligence should be on the radar of every terminal operator.

During our regular Market Update webinars, we offer our expert outlook on supply, demand, and trade flows and their impact on tank storage demand. 

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