The effects of Covid19 are not over, and it may be deemed too early to talk about energy demand effects. Energy demand projections before the virus have become obsolete. We have to build new models reflecting the new dynamics of the post covid19 world. But what are these dynamics?
During our podcasts with Cüneyt Kazokoğlu from FGE, we discussed how airline traffic was affected after 9/11. There are also studies on SARS disease’s impact. These are two folds. After 9/11, fear factor dominated, and air travel never reached the same volume for several years. In the case of SARS, the return of air travel has become much more quick and persistent. We have to judge the fear factor and regional effects.
The fear factor from a terrorist attack fundamentally changed consumer behavior and airline operation. The terror events after 9/11 and the hunt for Bin Laden took some time to settle. SARS disease, however, can be identified and eradicated in a matter of months. We should think whether the fear factor will force another change in consumer behavior.
The second important thing we discussed was the passenger car miles. During the previous pandemics, there was a visible increase in car usage as well as purchases. People may not prefer public transport due to their concerns about hygiene. Buying a car might become a priority. Car sharing may lose its popularity. The sharing economy may face a real challenge. The disruptive – startup ideas before and after the covid19 period may look very different.
According to some statistics, commuting to the work consumes eight mb/d of world oil demand of 100 mb/d. Currently, this demand drop is visible. The gasoline demand has fallen flat around the world, and diesel is still resistant. The results are evident in crack spreads. Jet and gasoline have become much cheaper. This may be the end of diesel as Cuneyt puts it “as a passenger car engine.” Industrial wise, the diesel engine is still competitive.
When it comes to electricity demand, the house becomes the center of life again. In most of the developed and developing worlds, most of the time spent was outside the home, excluding sleep. Now, people may develop more attachment to their homes and spent more time improving living conditions than going outside for a change. For the developing world, this may increase air condition sales and demand.
A more digital world may increase the share of ICT(Information and Communication technologies) share in electricity consumption. Now the world sees a drop in electricity demand. But if we have had the data for ICT consumption, we may see a bigger share of ICT. From video conferencing to online lectures, the demand has shifted from classrooms, meeting halls to fiber optics, and radio waves. This may improve economies of scale for some businesses, and some of this behaviour will stick with us.
Natural gas demand is probably the luckiest. Prices are very low, and the coal mining sector has been affected. But there are limits to natural gas demand in a crumbling global economy. When market share is in danger, the players try to bite each other’s shares. So with natural gas, the main question is about its impact on the competition between LNG and pipeline.
Smart and autonomous technologies may become a more integral part of our life, but contrary to the narrative, they may not bring much more efficiency. As Nature Energy’s latest March issue discusses, people may use these technologies to maximize their comfort. For example, a family may be shutting down its gas boiler as they sleep and starting it early in the morning after they wake up. Digital technologies may help them to start the boiler 1 hour before they wake up.
One of my favorite trends is how people became more interested in home cooking. The videos, recipes are widespread. The real question here is whether this will stick with them. Due to hygiene awareness, this trend may stay with us. The services sector and transportation will be negatively affected, but household energy consumption will grow. Competition wise, more competitive retail tariffs may become a new trend.
What to expect then? Jet demand may not come back to certain regions because of fear factors. Gasoline demand will dip in the short term but recover not very quickly but will be very strong in the medium term. Electricity demand will drop 10-15% for some time and then recover back to where it loses its momentum. Intra natural gas market wars will be much more important than intra fuel competition at least for some time. The sharing economy may not be as popular as before, but flexible working with flexible social security structures may be with us for some time to come.