Asia’s Insatiable Oil Demand

(Source: www.forbes.com)

Last month the 2018 BP Statistical Review of World Energy revealed that global oil production has now grown for eight straight years. Oil consumption rose to a new high as well, and has increased in 31 of the past 34 years. 

Today I want to take a deeper dive into global oil consumption numbers. Let’s first look at the global picture of the relentless growth of oil demand:

Following several years of softening demand in the early 1980’s, oil consumption turned upward in 1984. Since then, oil demand has risen by 39.2 million barrels per day — an increase of 67% and an average increase of 1.15 million BPD per year over the span of 34 years.

What some may find surprising is the source of that demand growth.

There are three major demand centers for oil in the world: The U.S., the European Union, and the Asia Pacific region. Cumulatively, these three areas are responsible for two-thirds of global crude oil demand.

While U.S. demand remains relatively high, it isn’t much higher today than it was at the time of the 1973 oil crisis. Likewise in the European Union demand is actually a bit lower today than it was in 1973.

However, it’s a very different story for Asia Pacific:

U.S. consumption is 3.5 million BPD higher than in 1973, which amounts to growth of just under 15% in 45 years. Demand in the EU has declined by 13% since then.

But demand in the Asia Pacific region climbed from 9.1 million BPD in 1973 to 34.6 million BPD in 2017. This 280% increase in demand is the primary reason the global demand curve has marched steadily higher.

Of course, Asia Pacific is where most of the world’s population resides. Thus, demand growth is being driven by billions of people who use a lot less oil per capita than the U.S., but whose per capita consumption is rising.

Chinese demand has increased by 5.0 million BPD over the past decade, by far the most of any country. But Chinese per capita demand is still only 3.3 barrels per person per year.

In the U.S., we consume about 22 barrels per person per year. That is partially a result of a more mobile and affluent population, but U.S. consumption also drives a much larger economy. To put U.S. demand in perspective, though, if China’s per capita demand were as high, it would be nearly as great as the entire current global demand.

In second place for the largest increase in oil demand over the past decade is India, which has seen its demand increase by 1.7 million BPD. Third place will probably be a surprise to many. Saudi Arabia has increased its oil demand by 1.5 million BPD over the past decade. These three countries were the only ones to experience demand growth over over one million BPD over the past decade.

The largest decrease in demand over the past decade was in Japan, which saw oil demand decline by 1.0 million BPD. Second place will be another surprise, as the U.S. saw oil demand decline by 800,000 BPD. Italy was third with a decline of 493,000 BPD, while the entire EU saw demand fall by 1.7 million BPD.

In the next article, I will discuss the primary sources that are satisfying all of this new demand.

More Info: www.forbes.com

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