BOSTON, MA, April 23, 2020. On April 23, 2020 London Economics International Chief Economist Marie Fagan, in association with the US Association for Energy Economics, released a podcast titled “Up the Down Staircase: What history teaches us about oil demand after a crisis.”

LEI examined data for four decades of history starting in 1976 and measured the oil intensity of global economic activity (in terms of barrels of oil per day, per million dollars of global GDP).  LEI’s main finding was that declines in oil intensity—whether driven by high oil prices or structural changes to the  economy, tended to resemble stair-steps, rather than gradual changes (see Figure 1). And once oil intensity fell, it did not recover to previous levels.

Figure 1. Oil intensity of the global economy—a descending staircase

(Source: BP Statistical Review of World Energy 2017 and World Bank)

The down staircase pattern means that even when oil demand recovers after this current crisis, it will not get to previous levels with respect to economic activity. The oil industry has been aware that that slower demand growth was probably on the horizon; the pandemic crisis has accelerated this probably by many years.

The research presented in the podcast was conducted for Columbia University’s Center on Global Energy Policy in 2018-2109.  For members of the US Association for Energy Economics, the podcast is available at USAEE Podcasts.