Societe Generale economists argue that Oil demand remains structurally inelastic despite sharp price gains. They estimate short‑run crude demand elasticity at –0.024, implying around 1.2 mb/d of lost demand so far, and warn that a move toward $150/bbl could destroy up to 2.7 mb/d of consumption.

High prices trigger gradual demand response

"Oil demand remains structurally inelastic, but high prices are now forcing incremental cuts in Asia. Japan, Korea, Taiwan, China and India are trimming runs, declaring force majeure, or prioritising household fuel use. From a quantitative perspective, we estimate the short run price elasticity of crude oil demand at –0.024."

"With prices up 47% since the start of the conflict and global demand at 104.8 mb/d, this implies a decline of roughly 1.2 mb/d. Gasoil/diesel shows the largest volumetric sensitivity, with an estimated elasticity of –0.027, suggesting demand could fall by around 400 kb/d. Jet fuel and naphtha exhibit the highest elasticities in absolute terms: –0.045 and –0.042, respectively."

"As we move into April with no resolution to the conflict in sight, we may soon be compelled to adopt our alternative Scenario B, which assumes a more prolonged disruption."

"If prices rise toward $150/bbl under our alternative scenario, we estimate that as much as 2.7 mb/d of demand could be destroyed, including approximately 900 kb/d from gasoil/diesel alone."

"These developments illustrate a broader truth: while oil demand typically responds only slowly to price changes, the magnitude and speed of this disruption are forcing incremental adjustments across multiple sectors—and the list is growing by the day."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)