As the COVID-19 pandemic continues to stretch the boundaries of not only people's health but also the global economy, Chevron Corp. Chairman and CEO Michael K. Wirth pondered the virus' impact on the oil and gas industry and when it will thrive again.
Wirth noted that aviation demand is significantly diminished and that gasoline demand -- not only in the U.S. but in other countries as well -- has dropped more than 50 percent during some lockdowns.
"Diesel demand [dropped] not nearly as much because supply chains need to function to bring food to people, to bring supplies to hospitals and to keep the economy alive," Wirth said during an online summit presented by the Texas Oil & Gas Association (TXOGA). The summit focused on the current state of the industry.
"What we see as the shelter-in-place orders are lifted in different parts of the world [is that] diesel demand has recovered a little bit, but it never really came off that much," Wirth stated. "As lockdowns lessen, gasoline demand has come back significantly, but not so much for aviation fuels. There's still a reluctance among many people to get on an airplane, but regional flights are coming back more rapidly than longer-haul, international flights."
With more of the workforce required to work from home, companies are discovering "that we can work in different models," Wirth said.
As a result, this work-at-home trend has impacted public transportation.
"There are a lot of behavioral changes right now. Will people get on a bus or a train or even in a taxi or an Uber, not knowing who was in that seat just a few minutes earlier?" Wirth asked. "With concerns about their health, will people choose to work more from home? Will they drive their cars rather than take public transit?"
Wirth admitted it's currently difficult to foresee "with certainty how that settles out in the log of time."
"But I think if we see a successful response to the virus and truly effective vaccines that ultimately can create immunity in the population around the world, [COVID-19] will become like other viral diseases that we've seen and understand. We've accepted the fact that they are going to affect our lives," Wirth said. "I think it will go back to what I would call 'relatively normal patterns.'"
Looking ahead with optimism
Wirth acknowledged that some change might accompany these "relatively normal patterns."
"I think work will become more flexible," Wirth stated. "I think business travel will probably be less because people will realize they can be effective without necessarily flying halfway across the country -- or around the world -- to do something they could do in a more efficient way."
Ultimately, Wirth said he is confident that "the fundamental drivers of demand growth" will remain intact.
"While there's a dip right now on longer- term demands, the trend is still up, particularly in countries with emerging economies like in Asia," he said.
Wirth observed that in the past, low crude prices stimulated advances in efficiency, productivity, assets and the application of technology.
"History tells us that 'tough times don't last, but tough people do,'" Wirth said. "I think businesses will adapt and get even better in this environment. Even though things are very painful right now -- and I don't want to minimize the pain on a human level -- I think the industry actually will emerge stronger."
Wirth concluded that he continues to be optimistic about the long term, even as he is realistic that the near term is likely to be a bit "uneven."
"I would describe it as 'choppy' until we see the economy really find firm footing," he said.
The discussion was moderated by TXOGA President Todd Staples.