Singapore, June 22 (ANI): The COVID-19 lockdown experience of reduced commuting and business travel alongside better air quality and family time may deliver lasting changes in energy consumption, Moody's Investors Service said on Monday.
Recessionary forces and weaker long term growth expectations will place pressure on both corporate and household demand, it said in the latest credit outlook report.
At the same time, the risk of behavioural change along with increasing use of biofuels, electric vehicles and improved engine efficiency adds to the likelihood of oil demand eroding over time.
Economic outlook, behavioural shifts and decarbonisation trends combine to increase the challenge of forecasting oil demand. "We consider scenarios for oil demand going into 2021 which are three to five million barrels per day (bpd) lower than 2019 levels as COVID disruption limits oil-based activities."
The strength of post-COVID economic growth will determine oil demand growth drivers, said Moody's. If economic growth does not offset the potential behavioural and other changes impacting oil demand, it could take a long time to recover to 2019 levels with an increased risk that demand already peaked in 2019.
The increased uncertainty and supply-demand imbalance creates a new context for investing in new oil developments that challenge traditional business models, said Moody's.
The potential for an accelerated structural shift in oil demand increases the challenges of forecasting the price of oil, undermining the investment case for new projects with a long lead in times for when oil is produced in the future.
Besides, power markets show a preference for a cleaner generation as demand falls. COVID-19 could have a ratchet effect, limiting any rebound in coal generation and accelerating the decline of coal in the United States and Europe by a few years.
Coal generation has continued to decline while renewables have shown more resilience across major markets in the United States, Europe, China and India. Renewables make up the majority of recent capacity additions which continue to displace thermal generation, especially with lower power demand.
A green stimulus is required to build on temporary carbon emissions drop. Moody's said 2020 could see a fall in global emissions of around 8 per cent from the previous year instead of the expected growth.
The need for further investment in low carbon infrastructure has not lessened due to COVID-19. Some governments are seizing the opportunity to place conditions on economic stimulus packages or on government bail-out funds for carbon-intensive industries. (ANI)