New world of crude



Sometime in the next few months, rich countries will buy less oil than the poor countries on the global petroleum market.

According to the Oil Market Intelligence report, crude oil demand for members of the OECD (Organisation for Economic Cooperation and Development) is now neck and neck with that of the non-OECD world. The OECD, sometimes called the rich nations’ club, has seen a steady decline in oil consumption among its members since 2005-06 and is now just a few hundred thousand barrels per day than the non-OECD countries who’s consumption continues to rise.

In March 2014, the latest figures, the two groups of countries were both at about 46 million barrels per day. Global oil consumption is today split in half between the haves and have-nots. To get a sense of how things have changed: in 1992, OECD members consumed 43 million barrels per day, dwarfing the 24.5 million barrels consumed by the rest of the world.

And this won’t be changing any time. Non-OECD members have seen their annual growth rate of oil consumption overtake the yearly increase of the rich nations since 2000 – mathematically ensuring that they would eventually overtake the latter countries in actual numbers. Which they are on the verge of doing now. OECD members, in fact, have experienced negative or near-negative growth rates for crude consumption since 2005 or so. The rest have seen growth rates of roughly two to eight per cent a year.

The flip side is to see the huge growth in developed world oil production, almost all of this thanks to the shale and subsalt revolution in the United States and Canada. The Organisation of Petroleum Exporting Countries last month produced 36 millions barrels per day. The US and Canada together have seen oil production climb to nearly 12 million barrels per day – a third of OPEC’s total production and an increase of nearly 3 million since Augsut 2012.

In fact, if one hangs charts of oil demand in the developed world – US, Japan and Western Europe – against those of emerging economies – China, Brazil and India – the trends are startling.

The US and Western Europe oil consumption peaked back in 2005-06 and have been falling off a cliff since. Japan began expelling petroleum from its energy mix as far back as the mid-1990s. Today, the three combined consume 10 per cent less oil than they did in 2005 and the graph is still falling.

In comparison, the rest of the world has seen oil consumption rise by about 20 per cent during the same period. The demand curves of China and India are particularly steep. India has jumped especially since economic reforms began. In 2002 it was consuming just about 2 million barrels a day, now it is approaching four. China is has also doubled its consumption in that period and is now over 10 million barrels per day. Even Brazil, ethanol centre of the world, has seen crude demand jump from about two million barrels in 2003 to over 3.3 million barrels today.

The new global oil order is slowly becoming one of emerging economies becoming addicted and requiring more and more petroleum – and rich countries weaning themselves off the black stuff and producing more and more of this at home. Oil politics is becoming a specialty of middle-tier countries who, ironically, have little knowledge and even less capacity to control global oil markets.

The makings of something awful in the future one suspects.

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