Oil demand elasticity signals limited relief from higher oil prices

Societe Generale’s latest analysis warns that oil demand elasticity remains low, meaning consumers and economies get only limited price relief when oil prices move. The report finds short-term oil demand elasticity around -0.1 (a 10% oil price rise cuts demand by only ~1%). Medium-term elasticity improves to about -0.3, but demand still responds sluggishly. The bank attributes the weak response to structural constraints: transportation, industrial use, and petrochemical feedstocks have few near-term substitutes. Even as electric vehicles expand, the transportation sector’s elasticity has fallen because remaining gasoline users often lack alternatives. Commercial trucking and aviation also show particularly low responsiveness. Industrial demand is described as especially rigid, with petrochemical feedstocks showing almost no price sensitivity below certain thresholds. Regionally, reported elasticity is also limited: North America (short-term ~-0.08; medium-term ~-0.25), the EU (-0.12; -0.35), China (-0.05; -0.20), and India (-0.04; -0.15). The implication is that supply disruptions can transmit more directly into prices, and energy shocks may keep consumer budgets and business costs under pressure for longer. For markets, the study suggests energy investment models may need revision, with scenario-based planning that reflects persistent inelastic demand. Overall, Societe Generale expects elevated and volatile energy costs to persist during the transition to renewables, because infrastructure and industrial decarbonization take time.