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Oil’s Three-Speed Recovery Has Turned the Industry Upside Down

  • Gasoline consumption recovers as people avoid public transport
  • Jet fuel demand way down on pre-virus levels, diesel pressured
A refinery in Norco, Louisiana, U.S.

A refinery in Norco, Louisiana, U.S.

Photographer: Luke Sharrett/Bloomberg
Updated on

The global network of tankers, pipelines and refineries that makes useful fuels out of crude oil is built on long-standing patterns of consumption: so much gasoline for the world’s drivers, a certain amount of diesel for trucks and a proportion of jet fuel for aviation.

The pandemic economy has turned that upside down, radically reshaping demand as different parts of the energy system recover at different speeds. Fear of the virus has persuaded millions of drivers to forgo mass transit and get in their cars. Meanwhile, international travel is a vestige of a year ago and thousands of airliners lie mothballed.

Although crude prices remain in the doldrums, stuck near $40 a barrel for the past four months, a three-speed demand recovery is starting to show in obscure corners of the oil market. India, ravaged by the Asia’s worst Covid-19 outbreak, has started to import gasoline. In Europe, drivers are using almost as much fuel as before the pandemic even though overall economic activity remains depressed. In Asia, where the divergence has been strongest, gasoline inventories have plunged in recent weeks.

By contrast, the market for jet fuel, about 8% of the global market pre-pandemic, remains dire, with idle tankers floating fully laden holding unwanted cargoes. Surplus fuel is being blended into diesel, causing knock-on oversupply.