BOSTON, June 14, 2021 /PRNewswire/ -- Economies
opening up after the COVID-19 pandemic will release huge pent-up
demand for travel, products, and services requiring oil, leading to
one of the strongest-ever growth periods for oil demand over the
next two years. But this supercycle will be unlike any we have seen
before. It will come more quickly and last for a shorter period—as
little as 18 months—than earlier booms, according to a new report
by Boston Consulting Group (BCG).
The report, titled The Last Oil Price Boom May Be in
Sight, reveals how a supercycle can support the
transition to low-carbon fuels and accelerate movement away from
fossil fuels. Higher oil prices can not only incentivize consumers
to moderate their oil consumption and switch to low-carbon energy
sources at the same price or less, but they can also generate
higher profits for oil producers, thus freeing up more capital for
low-carbon investments.
Energy transitions are already underway as policymakers and
companies seek to curb emissions and tackle climate change, slowing
the rate of growth in demand. With the oil market system becoming
increasingly flexible, and both supply and demand more elastic than
in the past, this oil boom could be the world's last.
Jamie Webster, a senior director
at the BCG Center for Energy Impact and a coauthor of the report,
said, "The impact of this next, and likely final, boom in oil
prices will be significant, and it will accelerate the transition
to a more sustainable global economy. A rise in prices, coupled
with postpandemic stimulus targeted at rebuilding in a more
environmentally friendly way, will see many countries step up
investment in renewable energy and electric-vehicle charging
networks."
Growing consumer interest in oil-dependent activities such as
leisure travel, together with a return to global economic growth,
are set to boost oil consumption over the coming years, fueled by
substantial savings amassed during lockdowns. More oil will also be
required as manufacturers rethink supply chain strategies in the
wake of recent disruption, transporting more products and
components to boost inventories above prepandemic levels. In
addition, spending cuts during the pandemic could create a supply
crunch as demand soars. Investment in oil and gas companies'
upstream businesses fell by 34% in 2020 following the
pandemic-induced decline in demand.
However, the rise in oil prices is likely to be short lived. The
oil industry has become more responsive to changing external
conditions, with smaller and faster production projects, lower
costs, and a better ability to balance market supply and demand.
Consumers are also increasingly able to adjust their oil
consumption in the face of higher oil prices, choosing among
options that include electric vehicles and hybrid work models. The
period of increased revenues also gives oil producers a chance to
invest in a lower-carbon future and repair their balance
sheets.
"Producers and oil consumers alike should use this opportunity
as a catalyst to prepare for the lower-carbon world ahead" said
Maurice Berns, a BCG managing
director and senior partner and a coauthor of the report.
"Producers should accelerate deployment of capital in areas like
hydrogen, renewables, and carbon capture. Heavy consumers can
transition to fuel from sustainable feedstock and use technologies
such as advanced analytics to optimize consumption, addressing both
the price of oil and its attendant emissions."
A copy of the report can be downloaded here.
To arrange an interview with one of the authors, please contact
Eric Gregoire at +1 617 850
3783 or gregoire.eric@bcg.com.
About Boston Consulting Group
Boston Consulting Group
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was the pioneer in business strategy when it was founded in 1963.
Today, we work closely with clients to embrace a transformational
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to make the world a better place.
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SOURCE Boston Consulting Group (BCG)