A wave of new oil refineries coming online in the Middle East and China will knock others offline, ushering in a period of consolidation, according to a new report from Goldman Sachs.

Global oil demand has taken an enormous hit from the Covid-19 pandemic. Depending on who you ask, demand may recover swiftly, or it may take a few years, or demand may actually never recover to levels seen prior to the pandemic.

DNV just published a report that estimates that oil demand may have peaked in 2019, although it warned that demand in 2050 will still be about where it is today. Improvements in energy intensity offset economic growth, but because demand is mostly flat for the next few decades, the world makes little progress on climate targets in this scenario.

Goldman Sachs pours cold water on the thesis that demand already peaked. For that to occur, the bank says, there would need to be “hyper” adoption of EVs, higher crude oil prices, lower GDP, and higher energy efficiency. “The absence of any of the above four factors would imply peak oil demand is still further down on the horizon beyond 2030,” Goldman concluded.

The bank sees demand rebounding quickly, rising above pre-pandemic levels after 2022. The bank cut its GDP growth target, revised up expectations of EV penetration, cut demand expectations due to the hit to business travel, but still sees demand growth by 1.1 million barrels per day between 2023 and 2025, before decelerating to 0.9 mb/d annual growth for the rest of the decade. Demand growth is lower than it otherwise would have been because of Covid-19, but the Wall Street bank still sees rising demand through 2030.

But the downstream sector could see some rocky times. Even as it takes a few years for demand to recover, a flurry of refineries under construction are not slowing down. Goldman analysts say that “mega refining projects” will come online between 2021 and 2024, and the new capacity will force all refineries to lower their utilization rates by 3 percent over that timeframe.

Fiercer competition between refineries, including the newer ones, will squeeze margins, and may force older refineries in developed countries to shut down entirely.

As for products, the bank says that gasoline will rebound strongly as road traffic returns. Fear of mass transit amid a pandemic is pushing more people into passenger vehicles. Jet fuel, on the other hand, is “the biggest loser from this crisis,” and may not return to pre-pandemic levels until 2023, Goldman says. As EVs begin to really gain steam in the years ahead, Europe will really lead the way, where diesel is much more prevalent in the passenger vehicle segment. In that sense, EVs eat into diesel demand.

On the supply side, all of the new refineries that Goldman analysts cite tend to be more distillate heavy, which will also weigh on diesel margins.

Curiously, however, the investment bank seems confident that the pandemic will not last long. “The Covid-19 demand shock has been much shorter in duration, unlike prior oil demand crisis seen in 1980s and 2008-09,” the analysts said. With the U.S. breaking daily records for new cases, the risk to that analysis would seem to be on the downside. In fact, the pandemic could last in some form for years.

But even in Goldman’s rosy assumption about a short duration, the buildout of new refineries in the Middle East and Asia still forces the shutdown of others in places like Europe and the United States. With oil demand growth coming largely from emerging markets in those regions, the new refineries will be better situated than older ones in OECD countries.

In short, more refining capacity is coming at a time of tepid demand growth. But if demand ends up disappointing in the next few years, the pressure on older refineries may be even more intense.