The world’s hottest storage hotspots
As the world is slowly emerging from the Covid-19 pandemic, it is
safe to say that the corona virus has had a profound impact on nearly
every aspect of our daily lives. Besides the more visible effects on
public health, society, and transportation, Covid-19 also sent a
shockwave through the global economy.
This shockwave also had its effects on tank terminals: As soon as the
true scope of the Covid-19 pandemic became apparent, the oil market
shifted from a backwardated market into a deep contango. Needless to
say, this contango immediately led to a significant increase in demand
for tank storage.
The road less traveled?
The demand for road and jet fuels has been affected most by the
Covid-19 pandemic. While the short-term effects of national lockdowns on
demand for fuels are relatively straightforward (fuel consumption is
strongly linked with people’s mobility patterns), it will be the
longer-term effects that are the most interesting to keep an eye on.
Large corporations like banks, IT companies, and insurers are already
preparing for a ‘new normal,’ where their staff will work more from
home after Covid-19 than they did before (source).
As people will commute less to their offices, a decline in overall car
traffic volume could be expected. Together with the ongoing
electrification of road vehicles, we expect that the current surplus for
gasoline will increase further.
When we take a look at diesel consumption, reversed dieselization of
passenger cars will lead to a faster decline than we will see for
gasoline. That being said, because the electrification of trucks is not
expected to happen in the coming years, there will still be a large
volume of diesel consumption left.
For jet fuel, we forecast that the current deficit for North-Western
Europe will grow at a slower pace. While it is expected air travel will
largely recover, analysts forecast it will take at least towards 2023
until air travel is back at pre-pandemic levels (source).
Over the past few years, the market for electric mobility has seen
incredible growth. In 2019, the global electric car fleet exceeded 7.2
million, up 2 million from the previous year. With more and more
electric car models being introduced to the market and charging
infrastructure improving, this strong growth is only expected to
increase. The IEA estimates that by 2030, there will be over 250 million
electric vehicles (excluding three/two-wheelers) on the world’s roads.
According to the IEA, the projected growth in the Sustainable
Development Scenario of electric vehicles would cut oil products by 4.2
million barrels/day. (source)
While battery electric vehicles (BEVs) are considered the preferred
solution for short-distance and light vehicles (passenger cars, delivery
vans) because of their high energy efficiency, their batteries have a
limited energy density compared to traditional fuels. This means that
for vehicles with high power demands, such as ocean liners, long-haul
trucks, and airplanes, batteries are highly impractical.
With an energy density that’s comparable to fossil fuels, e-fuels and
green hydrogen are poised to play a crucial role in our transition to
sustainable mobility. E-fuels are produced by electrolyzing water,
creating hydrogen and oxygen. While hydrogen gas in itself is an
excellent renewable energy carrier, it can be synthesized further with
carbon dioxide or nitrogen into more stable and easier to handle
e-fuels. When using electricity from renewable sources and circular
carbon dioxide (such as direct capture from the air), net emissions are
close to zero.
While this process’s overall energy efficiency is lower than that of
chemical batteries used in BEVs, the much higher energy density of
e-fuels makes them much better suited for applications with high power
demands, like shipping, trucking, and aviation.
As the call for reducing plastic waste gets louder and louder, the
concept of circular economy is gaining traction. While the market for
recycled plastics is growing rapidly and will have its effect on the
demand for chemicals, it is not foreseen yet that consumption of virgin
material will decrease the coming years.
It is clear that both the covid-19 pandemic as well as the transition to sustainable fuel sources will greatly impact the tank storage terminals. The market outlook for the oil and chemical industry will see significant shifts in supply and demand, while the Covid-19 pandemic only adds further complexities to the market. That’s why market intelligence should be on the radar of every terminal operator. During our regular Market Update webinars, we offer our expert outlook on supply, demand, and trade flows and their impact on tank storage demand.