As one of the most significant sources of oil demand, air transport is intimately linked to the oil industry. This means any lasting changes to the aviation sector would inevitably lead to lasting changes in the oil business.
Warren Buffett served a new blow to an already troubled industry, shaking it to the core, announcing that Berkshire Hathaway had sold all its holdings in airlines. The move sent ripples through the oil industry, as well.
Jet fuel was the oil derivative that has registered the greatest demand plunge so far this year, according to the International Energy Agency. Over the full year, it is likely to book a 33% total decline, equal to about 2.4 million bpd, according to Rystad Energy.
Peak oil demand has replaced peak oil supply as the doomsday scenario for oil in recent years thanks to a drive to replace fossil fuels with renewable energy sources to reduce humankind’s catastrophic carbon footprint.
This drive is still on, despite the pandemic. In fact, the European Parliament has sprouted a “Green recovery alliance” that will seek to make sure that crisis recovery will be tied to environmental targets.
Taking measures now to fight the climate crisis is not just a ‘nice-to-have’. It is a ‘must-have’ if we are to leave a better world for our children. What we do now will not only reshape our economies and societies; it will also reshape humanity’s future on this planet.
Companies are slashing billions in spending, and they are shutting in wells: a risky business because sometimes a shut-in well cannot be brought back to life. Some have filed for bankruptcy, and more are preparing to do just that.
Oil nations such as Russia and Saudi Arabia are bracing for budget revenue blows, and virtually everyone is cutting oil production.
U.S. shale companies will not be the only ones to start falling like dominoes. Many airlines are hanging by a thread, and even the top players in the air industry–including Boeing, Airbus, and British Airways–are feeling the pinch.
Boeing said it would be cutting 10% of its workforce after seeing a considerable loss in the first quarter. Airbus is also cutting jobs and warning its remaining workforce that it may not survive as it was.
British Airways said it would cut as many as 12,000 jobs. Four airlines have already gone under and this is just the beginning. According to industry bodies, as much as 85% of the world’s airline could be bankrupt by the end of the year.
Within a year, air travel could become a luxury few can afford, the way it was decades ago. Some believe it would take the air travel industry three years to return to pre-crisis performance, so this means no truly lasting damage.
However, uncertainty remains a keyword. Nobody really knows how things will turn out. If air travel changes for good, the oil industry will change for good, as well, helped by the generous efforts of pro-green governments and international organizations.
We may indeed witness the end of oil demand growth?
Oil Price.com / ABC Flash Point Oil News 2020.