Today, IPAA Declaration of Independents released an analysis entitled “Global Demand for Oil.” A lot of times, the conversation focuses on the production and development of oil – and rightly so. However, like any economic snapshot, the picture is not complete without understanding what’s happening on the consumption side of petroleum trends – both on a domestic and a global scale.
The article recognized the “diverging global trends” with regard to petroleum consumption. On the one hand, U.S. consumption is declining – thanks to massive progress in our energy efficiency. That being said, the U.S. still makes up a lion’s share of petroleum consumption, with our world-class transportation network fueling much of this demand. They don’t call the U.S. “the nation of highways” for nothing.
We’ve talked a lot about how energy is a foundation for the economy, but economic growth is also a key driver of energy consumption. In general, one can’t separate economic trends from energy trends. While U.S. demand is decreasing, we have seen a huge demand for petroleum in developing countries – like Asia.
IPAA economists analyzed what’s driving petroleum demand in the developing world:
“By contrast, rising living standards in the developing world have created new demand for petroleum-using technology and equipment with industrialization, modernization of transportation, and electrification. New vehicle registrations in China accounted for almost half of the worldwide increase in 2010. China now ranks second after the U.S. in number of vehicles on the road, surpassing Japan, and recent auto sales have exceeded those of the U.S. by nearly 50 percent.
“As a result non-OECD growth has added some 14 million barrels per day to world oil demand, or nearly 50 percent increase over the past ten years. Meanwhile, even with the OECD economies’ GDP growing a net 18 percent over that period, those countries’ combined oil consumption dropped about 5 percent or 2.5 million barrels per day. In the U.S. alone, the economy grew 17 percent and consumption fell 4 percent over the period. Put another way, because OECD oil demand did not grow in parallel with GDP over the past ten years, world oil consumption is more than 8 million barrels per day lower. The U.S. alone contributed more than 4 million barrels per day of that savings over 2001-2011. Demand can play a major role in reducing supply requirements whether through increased user efficiencies, improved technologies or economic slowdowns.”
Overall, the piece gives a great overall of the demand-side of the petroleum picture. It also highlights the better trade balance – and thus better energy security – the U.S. has enjoyed in recent years thanks to this decreased oil consumption, decreased imports, and increased petroleum product exports. Check out the full article for IPAA’s original graphs, too!