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Effect of Covid 19 in Diesel Supplier Industry

Date:02-06-2021 | By: Redlines

The fuel industry has not seen a market dip of this magnitude since the 2009 global recession. The pandemic has affected energy prices for several products starting from fossil fuel to numerous refined petroleum products, like diesel fuel, retail gasoline, heating oil, jet fuel, and gasoline. As economic activity slowed sharply across the world, demand for petroleum and petroleum-based products plummeted. The reduced demand, including an unexpected increase in supply, led to a collapse in oil prices and subsequent impacts on prices for refined petroleum products and gasoline. 

The diesel supplier industry being a part of the Oil and Gas industry, is subject to the highs and lows of economic cycles. The downturn caused by COVID-19, however, is unlike any other. With the survival of the many companies in danger, including a longer-term decline in petroleum demand, the subsequent decade could look very different for the oil and gas(O&G) market. Global oil demand fell by 25% in April 2020, but it rebounded sharply since then, cutting its losses to merely 8% by late 2020. Looking ahead, 2021 oil demand is expected to recover but remain lower than it was at pre–COVID-19 levels. The pandemic caused an economic crisis that led to an initial drop in prices for petroleum-based products but prices rose back up as producers limited production and the demand increased in the last two quarters of 2020.

The second half of 2021 will either be a  flourishing year or a test of endurance for many companies. Many new oil and gas trends will challenge traditional methods of oil and gas production in 2021 and determine the direction of the industry thereby separating the pioneers from the followers.  Oil prices are dependant on soft demand and rallying equity markets. What should O&G companies do to protect against downside risk and be ready for any potential upsides in 2021? The answer would be to consider accelerating the digital transformation to reduce operating costs, maintaining flexibility in their operations, and optimizing their annual capital allocation for future projects. 

COVID-19 and its subsequent oil downturn have boosted long-term trends, like energy transition and digital transformation. Digitalization is predicted to play a major role in energy transition strategies in 2021. Besides enabling remote operations and driving human-machine collaboration, digitalization has a crucial role to play in setting near-term emissions targets, using standardized and credible reporting, and tracking accountability. 

Natural gas also seems trapped between O&G companies’ decarbonization strategy to concentrate on low-carbon fuels and also the broader vision to interchange gas with renewables for electricity generation. Other challenges include the continuing problem of fugitive methane emissions related to gas, along with the growing electrification of the broader energy system. The oil and gas industry was facing a market slowdown even before the pandemic started. However, the pandemic has accelerated that decline from years to mere months. Adapting to the new energy future can be tough and will require companies to implement bold choices and not most are likely to succeed. 

The choices O&G companies make in the coming months, and the trends they choose, will decide the path forward and reverberate through their decision-making in the coming decade. Many fuel trading companies need to adopt few changes in their strategy and direction in 2021: 

  • Focus more on clean energy. 
  • Anticipate end-use demand patterns and prepare accordingly.
  • Consolidation in a low-priced environment
  • Introduce new talent strategies

As economies reopened, the initial price downturn gave rise to reduced oil production resulting in a partial recovery in oil product prices. With the implementation of the Covid Vaccines, the large-scale spread of the virus is controlled. However, it will take some time to balance out the reduced demand for fuel and people’s spending pattern in 2021.

Redlines Diesel Trading is a leading fuel trading companies in UAE which has earned a name for itself in this highly competitive market. Their premium quality low sulfur diesel fuel with efficient distribution across the UAE and outstanding customer service has helped them to become one of the best diesel trading companies in the United Arab Emirates.

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