COVID-19 and global energy

In 2020, the COVID-19 pandemic and related restrictions had a crucial impact on the global oil market. Producers had to adapt to falling demand and prices in a very short time, which stabilised the market by year-end 2020.

In 2020, the rapid spread of the novel coronavirus and the stringent measures to curb it introduced by most countries across the world were the dominant factor in the global energy market. As restrictions mostly applied to transport, which remains one of largest consumers of petroleum products, global demand for crude oil declined more than other types of energy resources. According to various estimates, global petroleum product consumption fell 20%–25% in April–May, which coincided with a build-up of surplus inventories and a disruptive collapse of prices to multi-year lows. Over the year, liquid hydrocarbon consumption decline averaged 8%–9%. This change in demand necessitated action on the part of oil producers, first and foremost OPEC+ players, to balance the market.

The economic slowdown caused by COVID-19 also impacted on other energy resources. According to International Energy Agency (IEA) estimates, total energy consumption decreased by more than 5%, natural gas consumption by 3%, and coal by almost 4%.IEA One of the reasons behind this is the growth of renewables in 2020, which enjoy strong support around the world, as lower mobility and the overall economic downturn are greatly contributing to GHG reduction, while government spending on renewables and decarbonisation are considered a solid post-COVID mechanism to stimulate economic recovery.

Early in 2021, demand for hydrocarbons continued to recover, and prices returned to their pre-COVID levels. However, it is still highly uncertain when the world will shake off the pandemic and its related restrictions, what the medium-term consequences for the global economy will be, and how evolving consumer behaviour, technologies and decarbonisation trends will influence energy consumption in the longer term.

Brent price, 2015–2020, $/bbl