BP: Free markets effective where allowed to work
Despite high prices, above-average economic growth drove robust global energy-demand growth last year, according to BP's latest statistical review of world energy.
Senior Editor - Economics
HOUSTON, June 24 -- Despite high prices, above-average economic growth drove robust global energy-demand growth last year, according to BP's latest statistical review of world energy.
Energy consumption worldwide increased 2.4% in 2007, driven by developing countries. This compares to 2.7% worldwide energy demand growth a year earlier.
Mark Finley, general manager of global energy markets for BP America, told a Houston audience June 24 that it is countries outside the Organization for Economic Cooperation and Development that are driving today's global economic growth and have accounted for 90% of all energy demand growth over the past 5 years.
These non-OECD countries have experienced an energy-intensive form of economic growth, as the world's heavy industry has shifted away from the developed OECD countries.
Global oil demand grew 1.1% last year, with robust growth in oil-exporting countries. Oil consumption growth by non-OECD oil importing countries has shown the greatest acceleration. Countries that subsidize energy prices accounted for all of the 2007 growth, Finley said, while oil demand in countries within the OECD declined nearly 1%.
Where allowed to work, high prices are effective at keeping demand in check, Finley said; US gasoline consumption, for example, has declined with higher pump prices.
Oil production slows
In its first decline since 2002, worldwide oil production fell 0.2%, or 130,000 b/d, last year. However the US posted its first oil production gain since 2000, led by onshore output in the lower-48.
Worldwide proved oil reserves were flat from 2006, totaling 1.24 trillion bbl, enough to meet current production for 41 yr, according to BP's assessment. Finley noted that estimates of the world's oil reserves keep rising, much more so due to factors above the ground, including prices, rather than due to geology.
Finley said that through 2007, the average crude prices for the first time in history increased for 6 years straight.
Rather than speculation in the oil markets, Finley said that tightening fundamentals and concerns of future market conditions are driving current prices for oil, heating oil, and natural gas. Speculation is a symptom—not a cause—of higher prices, he said.
The BP report shows that last year, natural gas consumption grew by an above-average 3.1%, although only North America, Asia Pacific, and Africa recorded above-average regional growth.
Coal was the fastest growing fuel in the world for the fifth consecutive year, as global demand rose 4.5%, above the 10-year average of 3.2%.