A truck driver attaches a fuel loading arm to his tanker at a petroleum depot while French fuel distribution operators strive to sustain supply chains impacted by the ongoing Hormuz crisis, in Ambes, near Bordeaux, France, on Tuesday. Philippe Lopez/AFP/Getty Images
The conflict in the Middle East has led to a rapid decline in oil demand on an unprecedented scale.
According to S&P Global Energy, oil demand is facing the steepest drop on record, excluding the collapse during the pandemic.
S&P predicts that overall demand for oil and petroleum products such as gasoline and jet fuel will decline by nearly 5 million barrels daily this quarter.
The results reveal “demand destruction,” a difficult situation where the high costs of goods and services make them unaffordable for certain consumers and businesses.
Another aspect: In certain areas, energy resources are so limited that fuel rationing has commenced. This means that some individuals who can and want to pay a high price for fuel are unable to obtain it.
Concurrently, the energy system’s buffers are diminishing.
S&P forecasts a significant decline in global crude oil inventories, estimating a drop of 5.5 million barrels per day this quarter, the highest ever recorded.
This “dual depletion” of stockpiles and consumer demand indicates that “the complete extent of the largest supply disruption in history is still ahead,” according to S&P’s findings.
“The approaching cumulative supply loss of nearly 1 billion barrels is an astonishing number that inventories cannot sustain forever.” “A certain market reckoning is approaching,” stated Jim Burkhard, global leader of crude oil research at S&P Global Energy, in the report.
Chevron’s CEO Mike Wirth warned on Monday at the Milken Institute Global Conference that “physical shortages” are imminent, beginning in Asia and subsequently spreading to Europe and the United States last.