NUR-SULTAN, Kazakhstan – The fall in fuel demand due to restrictions to curve the coronavirus pandemic led refineries of the European Union to reduce refining volumes, said William Harwood, senior vice president for Business Development, Eurasia, Argus Price Agency, speaking at the online conference jet fuel recently. The most sensitive products were such as diesel fuel and jet fuel.

“Traditional refineries in the European Union have seriously reduced their refining volumes during the period of low demand for diesel and jet fuel, which caused their economy to be seriously affected by falling prices for these types of products,” Harwood said.

According to him, the first reason is that the use of diesel as a fuel has passed its peak. According to research results, commercial vehicles will still run-on diesel fuel, but this may only last for a few years.

“Diesel is increasingly being replaced by gasoline and electric traction. And this is connected not only with the coronavirus but with the steps taken earlier to tighten environmental legislation in the countries of the European Union,” the expert noted.

He recalled that in the EU by 2020 it was planned to increase the share of renewable energy sources to 20%, and from January 1, 2021, this figure should increase to 32%.

Despite the fact that in the summer in Eastern Europe, where restrictions on personal and commercial transport were not as severe as in other European countries, the demand for diesel fuel increased, but this did not save the situation – prices for this product fell to the lowest level since 1990 of the year.

“Current situation has shown that many of the restrictions taken in connection with the coronavirus can remain in our lives either forever or for a long time. So, working at home is already perceived by people calmly, this will undoubtedly affect the frequency of using personal transport. In Europe, diesel fuel for private vehicles accounts for 40% of all other fuels,” Harwood said.

To somehow save the situation, this year the flows of European diesel fuel went to the US market. “Four years ago, the United States supplied 800,000 tonnes of diesel fuel to the European market per month due to the high demand for this type of product. Now this flow has dried up and even started to reverse from Europe to the US, and insignificant volumes,” Harwood said.

He also mentioned another negative factor associated with the coronavirus – a drop in demand for jet fuel due to a decrease in passenger traffic. “People will start to actively travel when all restrictions are lifted, but some researches show that they will no longer fly as they used to. People will enter the plane thinking that this is associated with a greater risk of infection. Such sentiments slow down the recovery of the situation with aviation kerosene. We are expecting that only by 2023 the rates of travel by air transport may increase,” Harwood said.

H opined that the current situation is unacceptable for the profitable operation of refineries. Refineries in Europe have reduced the volume of processing and are saving today on what they can.

“The economic risk in European refining is present in the coming years. It is unlikely that we will return to the consumption level of 2019, for example, for the same diesel by 2022,” the expert noted.

According to him, first of all, those companies that have weak integration, both in the upstream and downstream, which have a low level of portfolio diversification in different regions of the world, have weakened.

“All this could be a determining factor in the reduction of the traditional processing sector in Europe. A number of refineries were hit. Basically, these are those who did not have serious reserves to cover losses,” Harwood said.




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