Mobility is one of the artery systems of our economies, the element that, among other things, connects society and brings supply chains to life. Mobilityis also at the core of the corona crisis as the lockdown measures brought everyday life to a standstill. Home office rules meant fewer commutes; closedrestaurants meant less need to leave home for dining out; and the economic recession meant less busy supply chains. On top of this, some forms ofmobility are associated with higher risks of infections, such as crowds gathering in closed spaces – think of airplanes, buses or trains. Mobility indicatorsare also key in assessing the recovery. Road, public transport or air traffic are watched closely these days to assess economic activity and how far it hasnormalised.
However, mobility has been undergoing structural change for some years already, unleashed by various societal and technological trends. The coronacrisis has become a powerful catalyst of this change and thus there is broad debate on how the world post-pandemic might differ. So, what conclusionscan we draw about how and where the crisis has lastingly transformed the way we get around?
Mobility patterns: Temporary or lasting changes?
More than six months into the crisis, mobility offers a diverse picture. Road traffic shows the swiftest normalisation, with congestion yet again a dailychallenge across most urban hubs around the globe. Meanwhile, usage of public transport seems to be returning more slowly. Air traffic remainsdepressed, although there is a divergence between domestic and international, i.e. long-haul flight activity, with the former rebounding more swiftly.
On the other side of the spectrum there is, for example, cycling, where booming sales match with anecdotal evidence of meaningful increases in bicycleson the road. These patterns are the result of three distinct elements. First, a recovery of economic activity; second, a temporary change in habits in fearof infection or due to responsible behaviour in order to limit the pandemic; and third, a potentially lasting change to how individuals or householdsorganise their business and social life. Only the latter carries structural change and defines how the world after corona might look different from before.Habits and social needs are strong. Besides the reality check for business travel, we expect no lasting impact on mobility patterns.
Electric mobility: The dawning of a new era?
The auto business has taken a particularly harsh beating over the past months. The crisis disrupted supply chains and closed dealerships, whileconsumers, on the back of economic uncertainty and loss of income, reduced their spending. Cars are the preferred means of getting around globallyand thus the auto segment dominates the broader transport business. These cyclical challenges came on top of structural challenges. The auto markethad been in global recession for more than two years already, as sales slipped from their 2017 peaks on the back of market saturation in China, Europeand the United States. Moreover, the shift in technology towards hybrid and electric cars and the entrance of various new competitors resulted in highinvestment needs, manufacturing overcapacities and thus profitability issues. 2020 was set to be a pivotal year as the automakers meaningfully expandtheir offering of plug-in cars. With more choice, there are usually more buyers and more sales. Because of new models and because of stimulusmeasures, more than one out of ten cars sold in Europe had a plug this summer, a market share that seemed unrealistic only recently. While the coronacrisis is unlikely to bring lasting change to mobility patterns, the consequent stimulus measures are likely to fast-forward the arrival of the electric carmass market.
Oil: A new market order?
Mobility and the oil market are closely related. World oil demand collapsed and troughed at around two-thirds of normal levels in early April, on the back of the mandated mobility freeze. Today, and despite a strong rebound in road fuel use, global oil demand remains around 95% of pre-crisis levels. The corona crisis leaves behind two key legacies for the oil market. The first is peak oil demand. Passenger cars account for roughly a third of oil demand. Road fuel use overall, including trucks, represents just above half of oil demand. The accelerated electrification suggests that road fuel use will plateau and decline earlier than previously expected. The headwinds from the shift to electric cars and fuel efficiency gains should begin to offset the tailwinds from population growth and wealth creation.
In sum, the corona crisis likely accelerates the competitive dynamics in the oil business, with twofold implications. First, the private oil companies have to venture to other areas, such as clean energy, to deliver growth and satisfy investors. Yet providing oil will still offer the opportunity to realise sound cash flows for years to come. Second, the petro-nations and their state-owned oil companies are under increased pressure to adjust their economies and social contracts to an environment of permanently lower petro-dollar revenues. Ultimately, this will be a shift from resources to technology and from producers to users, bearing broader geopolitical impact and raising the risks of related tremors.