In July 2020, a few months after the Covid-19 pandemic escalated and spiraled out of control, Shell CEO Ben van Beurden announced that global oil demand may have crossed its peak and will not return to what it was.
"It's going to take a long time for demand to recover, that's if it recovers at all," Van Beurden told reporters after his Anglo-Dutch energy company reported a sharp drop in second-quarter profit.
Van Beurden was not alone in his pessimistic opinion. Like many events during the pandemic, what is happening in the fuel markets has been unprecedented. Demand had fallen sharply as people stopped traveling and the oil industry simply couldn't cut production fast enough to keep up with the decline.
Worse than that, the decline in demand came at a time when Russia and Saudi Arabia, which had the greatest influence in the OPEC+ bloc of producing countries, were fighting a supply war that flooded the markets.
The abundance of oil reached a point where there were not enough storage places, and in mid-April 2020, the price of a barrel of West Texas Intermediate crude fell below zero, as sellers had to pay money to get rid of it.
Yet less than two years later, it appears that Van Beurden and others' predictions of the end of the oil age were premature.
Oil prices jumped on Thursday, with Brent rising above $105 a barrel for the first time since 2014, after Russia's attack on Ukraine exacerbated concerns about disruptions to global energy supply, according to Reuters.
And the possibility of supply disruptions in the event of a war reinforced an upward wave that was supported by the recovery of oil demand at a faster pace than the ability of oil producers to keep pace with it.
Last year, global oil consumption exceeded supply by about 2.1 million barrels per day, according to estimates by the International Energy Agency, and will exceed its 2019 levels this year.
Oil suppliers have been forced to deplete stocks to meet demand and consuming countries are appealing to major companies such as Shell to extract more oil.
Boom, Bust Cycle
Throughout the history of oil, this cycle has been repeated over and over.
"If you go back to the whale oil days, oil was a boom and bust," said Phil Flynn, an analyst at Price Futures Group in Chicago.
"It's a top-to-bottom cycle, and when you reach the bottom you usually have to prepare because the top is not very far," he added.
The collapse of oil prices in the early 2020s triggered political moves that might not have been imagined.
US President Donald Trump was so concerned about the possibility of the collapse of local oil extraction companies in the United States that he issued an ultimatum to Saudi Crown Prince Mohammed bin Salman in a call in April, in which he demanded that he cut production, otherwise he would risk withdrawing US forces from the kingdom.
Pressure has also been mounting from investors and governments on oil producers to cut emissions.
In mid-May 2021, the International Energy Agency said that no new funding should be allocated to major oil and gas projects if world governments hope to prevent the worst effects of global warming.
It was a fundamental shift in the attitude of an institution that had long been a vocal advocate of fossil fuels.
Politics Power
The role of the shift in energy use in politics has prompted major European oil companies to refrain from investing in increased production and so their natural reaction to higher prices, pumping more oil, has been much slower than usual.
A number of OPEC + member countries did not have sufficient liquidity to maintain oil fields during the pandemic period with the collapse of the economy and are now unable to increase production until expensive and time-consuming work is completed.
As for the countries that have an additional ability to increase production, such as Saudi Arabia and the UAE, they refuse to exceed their quotas in supplies in accordance with the agreements of the OPEC + group.
Indeed, the US shale oil industry, which was the world's most important resilient producer from 2009 to 2014, has been slow to restore production amid pressure from investors to raise financial returns rather than spending.
All of this sowed the seeds of the current boom.
Now the Biden administration, which wants to combat climate change while protecting consumers from rising fuel prices, is encouraging oil extraction companies to increase their activity and asking OPEC+ to produce more oil. The International Energy Agency is also calling for an increase in production.
Scott Sheffield, CEO of American shale oil company Pioneer Natural Resources, says that this task may be difficult.
He told investors last week that OPEC + did not have enough spare production capacity to address rising global demand and that his company would limit production growth to between zero and five percent.
Mike Tran of RBC Capital said that what will eventually balance the market is higher prices, not new supplies.
Others, however, believe that supplies will eventually increase, as prosperity after all always comes before a depression.
"We think the $100 price of crude brings with it all the disadvantages, from too much supply, too quickly. We don't think it's sustainable," said Bob Phillips, chief executive of Houston-based Crestwood Equity.
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