Disruptions, and subsequent future uncertainties, are often the most forceful catalysts for change. For established airlines the disruption was the advent of no-frills low cost airlines, as was introduction of shared-asset platforms such as Uber and Airbnb the harbinger of change for mobility and travel industries. The hydrocarbon sector, and specifically refineries, have long resisted change, even as they have faced headwinds in the form of electric vehicles, climate action, IMO regulations and, closer to home, transition to new fuel standards like BS VI, among others. The uncertainties of the post Covid world, with its long ranged implication on fuel demand volatility, however, may finally bring in a much awaited move towards true ‘digital refineries’.

Covid-19 oversaw an unprecedented domestic fuel demand slippage of 46 percent in April on YoY basis amidst surging product inventory costs. While the average demand for transportation fuels increased in July to around 85 per cent of the pre-COVID levels as multiple cities opened up to localized business mobility, it is critical to acknowledge that the fuel demand is “recovering”, but not necessarily “recovered”. We will likely continue to see repeated shutdowns in different locales, such as the most recent one in Beijing, which caused a cancellation of more than 50 per cent of flights, schools to be re-shut, and traffic congestion to rapidly decline; oil demand is expected to have dropped to 100 kbd on this shutdown alone. For an industry that has historically witnessed demand deviations within very narrow ranges, it would require an entirely new DNA to tackle a future with significantly amplified spikes and troughs.

Just to be sure, “digital” and AI become crucial when one is faced with multiple business variables, moving dynamically and with a high degree of uncertainty. There are a few major fundamental changes that are expected to create such an environment in the fuel world, going forward.</p