Societe Generale economists have highlighted that oil demand remains structurally inelastic, even in the face of sharp price increases, with a short-run crude demand elasticity estimated at –0.024. This suggests that despite a 47% rise in oil prices since the start of the conflict, global oil demand, currently at 104.8 million barrels per day (mb/d), has declined by approximately 1.2 mb/d so far [1]. The report notes that Asian countries including Japan, Korea, Taiwan, China, and India are responding to high prices by trimming refinery runs, declaring force majeure, or prioritizing household fuel use [1].
Among oil products, gasoil/diesel shows the largest volumetric sensitivity with an estimated elasticity of –0.027, implying a potential demand reduction of around 400 thousand barrels per day (kb/d). Jet fuel and naphtha exhibit even higher elasticities in absolute terms, at –0.045 and –0.042 respectively [1].
Societe Generale warns that if oil prices rise toward $150 per barrel under their alternative Scenario B, up to 2.7 mb/d of demand could be destroyed, including approximately 900 kb/d from gasoil/diesel alone [1]. The economists emphasize that while oil demand typically responds slowly to price changes, the current disruption is forcing incremental adjustments across multiple sectors, and the impact is expanding daily [1].
Looking ahead, the report suggests that with no resolution to the conflict in sight as April approaches, a more prolonged disruption may compel the adoption of Scenario B, which assumes further demand destruction and sustained high prices [1].
CONCLUSION
Societe Generale's analysis indicates that oil demand is beginning to decline in response to sharply higher prices, particularly in Asia. If prices continue to rise toward $150/bbl, the market could see significant demand destruction across multiple oil products. The ongoing conflict and lack of resolution point to continued volatility and high market impact.