Slowing demand growth will likely create a fiercer competition among oil producers, analysts said. Since the early 1970s, petroleum demand growth has been progressively slowing, with the downtrend expected to continue through the 2020s and 2030s. This will likely result in an intense fight over market share in the next two decades, which can put downward pressure on prices, revenues, investment, and employment.
Before the oil shocks in the 1970s, worldwide petroleum consumption had been expanding at average rates of around 8% a year. The growth slowed to less than 2% a year after the oil price shocks of 1979/1980. Since the 2008/2009 global financial crisis, it has slowed even further to below 1.5% a year.
The oil price shocks of the 1973/1974, 1979/1980, and 2008/2009 left a permanent scar where oil consumption never returned to its pre-shock growth rates. This scar has been profound, especially in OECD advanced economies. The current shock is expected to the same permanent mark with consumption throughout the 2020s remaining below the projected levels if the pandemic never occurs.
Slower growth rates mean harsher business conditions for higher-cost producers the analysts said. US shale players will likely leave their rapid expansion drive towards profitable operation at lower prices. Global oil majors are expected to focus on projects that have break-even at lower average prices so that they can deliver returns to shareholders. Meanwhile, OPEC countries are likely to step up efforts to diversify their economies towards alternative non-oil sources of income.
