Due to the outbreak of the coronavirus (COVID-19), energy demand in the market is affected worldwide. In China, as energy consumption is correlated to economic performance, the economy is hit by the viral outbreak as well. Less oil and natural gas are imported and consumed, fewer planes are being used, and fewer factories are operational.
It is expected that the global oil demand will fall through and drop by 4%, with the yearly demand for oil to fall by 435,000 barrels per day during the first quarter of 2020. The demand for China’s liquefied natural gas is also down, and despite being the largest importer of liquefied natural gas, China suspended contracts with at least three of their suppliers because of the coronavirus.
China’s demand is important as the world’s second-largest economy, as it can determine the international oil and gas prices. With this, analysts are projecting an abundant supply of both oil and natural gas with future prices for natural gas already down by 30% in the past year which can mean more money for household savings.
As for electricity demand, a forecaster expects China’s industrial electricity demand to decline by as much as 73 billion kilowatt-hours, factoring in the lull in factory output caused by the outbreak. Even if the decline is only amounting to 1.5% of total industrial power consumption in China, it is equivalent to the power used by a smaller country like Chile.
Many other factors contribute to the lowering electricity demand in China and they include: for-year low of daily usage of coal-fired power stations, low level of oil refinery rates in Shandong province, the lowest level output of key steel products, drop in domestic flights by up to 70%, and drop in car sales by 92% in the first two weeks of February.
All in all, the measures to combat and contain the coronavirus outbreak cost China 15-40% of their output across many important industrial sectors, which also cut the carbon dioxide emissions of the country. Because economies have been linked to a wider global economy, a loss of output in a big country like China has effects in other parts of the world as well. While the drop in international prices for fuel aids customers in the short term, it hurts the producers and projections in the long term. As the situation of other countries varies with regards to the coronavirus, connections, and disruptions in the global economy can still be felt domestically one way or another.
Because the virus is still running its course and has yet to be completely contained, it is hard to tell when the economy can recover and be back to the way it is before. The impact to the energy economy is significant as energy use if usually one of the fastest indicators of economic performance as they as so closely tied to one another. At times like this, it is clear to see how closely interconnected energy consumption and economy are.