Tanker demand is here to stay for the next few decades at least. In its latest weekly report, shipbroker Gibson said that “last week we wrote about the future of North Sea oil production and how it is a story of two halves. With production in the UK sector on a downward trajectory, whilst in the Norwegian sector, the recent start-up of the Johan Sverdrup field will see production hit multi-year highs.
This comes just as the world is still getting to grips with the impact of COVID-19 and the trail of destruction to lives, economies and companies in its wake. We are still far from getting back to what we can call ‘normal life’, despite extensive vaccination efforts across the globe.
Here in the UK, we have been told to expect to live with restriction in various aspects of our lives for several years to come. The pandemic has led us to adjust how we do things resulting in fewer people travelling via planes, trains and automobiles for work and leisure, leading to a slump in demand for oil”.
According to Gibson, “it is anticipated that once we get back to whatever we call ‘normal’ overall demand for oil will have changed, forever. Have we reached peak oil demand? Will there be a gradual decline in oil demand? The pressure to combat climate change is likely to continue unabated, especially as Pres. Biden has committed the US to halve CO2 emissions by 2030. How demand will change around the world will depend on a variety of factors.
Currently, ‘oil majors’ actually only hold around 12% of oil reserves, this compares to around 66% of the worlds petroleum supplies are in the hands of National Oil Companies (NOCs) such as Saudi Arabia’s Aramco, Russia’s Rosneft or Mexico’s Pemex.
Other independent oil companies take the remaining 22%. This means that even if the oil majors commit to become cleaner ‘energy’ companies, their influence is smaller than in the past”.
“So, it would seem that NOCs will have a far bigger role in influencing future supply. For states that rely heavily on oil, it would appear there is little incentive to cut production.
With peak demand somewhere on the horizon, there may actually be an incentive to produce more oil; it may be better to sell the resource at a lower price now than leave it in the ground.
Carbon Capture may be a way for NOCs to continue producing hydrocarbons to offset their future carbon emissions”, Gibson noted.
The shipbroker added that “there is also going to be the question of need. Even if the world managed to electrify car and train transport, it’s going to be an awful lot harder to power ships (and planes) with anything other than oil products.
Similarly, there are the massive plastics, chemical, fertiliser and textiles industries that depend on products derived from oil. So, the overall ‘greening’ of the global economy currently seems to focus on the easiest parts to green, those of the power and transport sectors.
A combination of renewable energy and electric vehicles means that oil is facing competition in the transport and industrial markets – something that has never really happened before”.
“Oil has made the modern world in which we live, finding a replacement for the black gold and the many things that it can provide will be a hard-won process.
That process now seems to be gaining momentum, but, despite all this, direct replacements will be at least a generation away. Meaning that there will be continued demand for oil, product, and chemical tankers for decades to come, even if the industry has to live with easing absolute demand at some point”, Gibson concluded.
Ref: Nikos Roussanoglou, Hellenic Shipping News Worldwide