The Impact of Covid-19 on the Oil and Fuel industry in 2021
The oil and fuel industry is going through its third price collapse in just twelve years. It bounced back from the first two fundamentally unchanged, but after the double whammy of COVID’s impact on both supply chains and demand, companies will have to change their operating models to survive.
Lockdown and home working have slashed the number of vehicles on the road and hence the demand for petrol and diesel. According to the Petrol Association, demand in the UK fell by 66% in 2020.
Air travel has also taken a drastic hit, and these factors have in turn driven down demand for oil. Companies have faced eye-watering losses: BP recorded a loss of £13 billion in 2020.
In the short term, retailers are trying to woo consumers back to the pumps by lowering petrol and diesel prices, which are currently slightly below January 2019 prices at 118.5p and 121.8p a litre respectively.
And while grappling with this, all fossil fuel companies also face the urgent need to improve energy efficiency as climate legislation tightens.
European companies have so far shown more enthusiasm for this than American ones: Shell, BP and Total have all announced moves towards sustainable energy to support the goal of net zero by 2050, whereas ExxonMobil and Chevron remain reluctant.
With Exxon losing $22.4 billion in revenue in 2020, it’s surprising that US companies have not made long-term plans to survive into the age of the electric car.