Air transportation was one of the sectors most affected by the COVID-19 pandemic. In the first months of lockdowns, global passenger turnover collapsed from 700 billion passengers per month to less than 50 billion. As a result, the demand for oil in air transportation dropped by 40% in 2020, to 4.78 million barrels per day (bpd), and the share of air transport in the structure of final demand for oil went down from 8% to 5%, according to the Energy Institute. It took the industry four years to recover, including due to the persistent COVID restrictions in China, which wouldn’t lift the two-week quarantine requirement for those entering the country until January 2023.
The recovery in air transportation in the Asia-Pacific has been uneven. Passenger turnover for flights from the Asia-Pacific to the Middle East was 0.4% higher in January 2024 compared to January 2019, whereas the turnover for flights from the Asia-Pacific to Europe and North America was below the pre-crisis level by 14.6% and 27.4%, respectively, and by exactly 18% for transportation within the Asia-Pacific region. The growing passenger load on these routes will contribute to oil demand increase, especially due to the fact that Asia-Pacific accounted for exactly 50% of the regional reduction in oil demand in air transportation (1 million bpd out of 2 million bpd) back in 2020.
The almost complete recovery of air transportation to the pre-crisis level will inevitably slow down the growth in oil demand, which was markedly restorative in recent years. While the growth in global oil demand totaled 5.5 million bpd in 2021 and made up 2.0 million bpd and 1.9 million bpd in 2022 and 2023, respectively, it will be only 1.4 million bpd in 2024, according to a March forecast by the U.S. Energy Information Administration (EIA). The market is essentially coming back to the pre-crisis normal, in which the growth of oil demand from petrochemistry cannot fully offset the declining demand from land transportation, which is undergoing an electric vehicle revolution.
