COVID-19 wipes out demand for fossil fuels — will they bounce back?

People are creatures of habit and may eventually return to the same lifestyles they had before COVID-19. On the other hand, the severe lockdown may be just enough to change those personal and professional routines and usher in an era less reliant on fossil fuels.

Oil demand will take time to return and may not recover to pre-pandemic levels, says oilpatch leader

Has the world reached peak oil demand? Veterans of the oilpatch aren't sure of the answer. (Jonathan Hayward/The Canadian Press)

The outbreak of COVID-19 is wiping out demand for fossil fuels as part of the most severe plunge in energy consumption since the Second World War and is on pace to trigger multi-decade lows for the world's consumption of oil, gas and coal.

Still, many countries are beginning to ramp up their economies and steadily begin to re-fill those vacant workspaces and empty industrial buildings. 

That's why there is debate about whether demand for fossil fuels will rebound and even surpass pre-pandemic consumption levels. 

People are creatures of habit and may eventually return to the same lifestyles they had before: commuting to work everyday, driving long distances on the Trans-Canada Highway to visit family over the summer and taking a trip to the Caribbean in the winter. On the other hand, the severe global lockdown may be just enough to change those personal and professional routines and usher in an era less reliant on fossil fuels.

It's a question on the mind of many, including those in the oilpatch, who are suffering billions of dollars in losses right now and don't know what the future holds. 

The topic came up this week during oil company conference calls and also among environmental policy leaders, who held a webinar to discuss discuss the pandemic's impacts on Alberta.

COVID will help the energy transition

Many people who have been able to work from home during the pandemic realize it could make sense permanently. Without having to commute to the office everyday, it can be much more convenient, especially when kids are back in school or daycare.

Keeping more workers at home is also appealing to many companies because of the potential cost savings with less office space requirements and the ability to have a deeper labour pool, among other benefits.

Many companies are finding success with having employees work from home, including Waterloo-based Open Text, which won't need so much of its office space around the world. (OPOLJA/Shutterstock)

Oil executives see the value, too, as Husky Energy CEO Rob Peabody said this week, "It's early days, but there's no question it is going to change the way we work long term."

One of Canada's biggest tech companies, Open Text, said it's permanently closing half its office space amid restructuring and work from home success with its 15,000 employees.

That's just one way the pandemic may lessen the demand for fossil fuels long term.

As economies reopen, there is some expectation that governments around the globe will announce significant stimulus spending to aid in the recovery process.

That could be a boon for the environment, since many energy transition challenges are "about big investments," according to Sara Hastings-Simon, a research fellow at the University of Calgary's School of Public Policy.

"I think you could see an acceleration from that."

At the same time, she points to a slowdown in the construction and funding of new projects, such as those in Alberta's oilsands.

"We're going to see, actually, a kind of pause in investment in some of these longer term assets," she said.

University of Calgary policy researcher Sara Hastings-Simon says the pandemic may speed up the transition toward low carbon energy. (Mike Symington/CBC)

Renewable energy is expected to grow by five per cent this year, according to the International Energy Agency, to make up almost 30 per cent of the world's shrinking demand for electricity.

Some environmentalists believe the pandemic will help bolster an energy transition because it has reinforced the importance of science in policy decisions. 

COVID will hurt decarbonization

David Keith understands all those points quite well, but "I don't really buy it."

The former University of Calgary climate scientist, now at Harvard, said taking action against a pandemic is much different than fighting climate change. 

"People are highly motivated to deal with threats that are immediate and severe," he said.

However, there's no obvious body count with climate change and that's one reason there isn't as much urgency to deal with it, he said, even though it is, in his opinion, the biggest global environmental threat.

WATCH | David Keith, Sara Hastings-Simon and Ed Whittingham discuss the pandemic's impact on decarbonization:

David Keith, Sara Hastings-Simon and Ed Whittingham discuss the pandemic's impact on decarbonization:

4 years ago
Duration 5:15
Featured VideoThree policy leaders discuss whether the twin crises in the oilpatch will ultimately help or hinder energy transition in oil and gas.

"My expectation is that the COVID crisis will actually slow progress and decarbonization by driving up public debt, which makes it harder for governments to do anything else."

"Governments are going to focus on ways to stimulate the economy, fast, whatever they are, and they're gonna focus on other things like medical care and bioterrorism preparedness." 

Climate could take a backseat for quite a while, he said.

Peak oil demand?

As some parts of Canada and the U.S. ease lockdown measures, refineries are expected to begin increasing production. Those facilities could be back to full capacity by the summer, according to Alex Pourbaix, chief executive of Cenovus Energy, who points to how fuel demand in China has nearly recovered.

Still, others in the industry aren't sure about its future.

Royal Dutch Shell cut its global refinery activity by up to 40 per cent and is bracing for a recession that would extend into 2023.

For decades, experts have tried to forecast when oil demand would reach its peak and begin to fall. This year is likely an anomaly, but there is some belief the world will never again have as much thirst for oil as it did pre-pandemic.

"I see today a lot of weakness in demand. It will take some time for that demand to be restored. And it may not be restored to the levels that we've seen in the past," John Browne, the former head of British Petroleum, said recently.

WATCH | Retirement savings drop as oil industry suffers major losses:

Retirement savings drop as oil industry suffers major losses

4 years ago
Duration 2:02
Featured VideoFinancial losses in the oil industry aren’t only impacting the companies’ bottom lines; Canadians’ retirement savings are taking a bit hit too.

Even the impact of relatively cheap gasoline isn't always easy to predict. Low prices at the pump usually spur more demand and disincentivize the purchase of fuel efficient or electric cars.

At the same, governments will have an easier time introducing or hiking carbon taxes when gasoline is cheap and besides, the situation may be short-lived as fuel prices are already increasing across the country. 

What seems certain is the oilpatch is in for a rough ride. But many companies still have a long future ahead, according to Ed Whittingham, the former executive director of the Pembina Institute, who organized a webinar to discuss Alberta's future with Keith and Hastings-Simon. 

"If we can actually help our companies, give them the financial space to retool the transition, then I think our companies are going to come out ahead of this and Canada as a whole will come out ahead on transition."

Many Alberta oil producers were already taking action on climate change, which should help them, he said, but they may need federal government aid now to survive the crisis they're facing.


Kyle Bakx

Business reporter

Kyle Bakx is a Calgary-based journalist with the network business unit at CBC News. He files stories from across the country and internationally for web, radio, TV and social media platforms. You can email story ideas to