BP reports fastest oil demand fall since 1982

Uchenna Izundu
OGJ International Editor

LONDON, June 11 -- Global oil demand has fallen at its fastest rate since 1982, according to BP PLC’s statistical review of world energy.

Tony Hayward, chief executive officer of the company, said global oil production will fall because of dwindling demand and improvements in energy efficiency. Last year, oil consumption in the developed world fell by 1.6%—the largest decline since 1982. This trend is expected to continue.

For the first time, the developing world led by China consumed more energy than OECD countries: China represented nearly three-quarters of global growth and its energy usage was 17.7%. This was the slowest rate for 5 years.

“This is not a temporary phenomenon but one that I believe will only increase still more over time,” Hayward said. “It will continue to affect prices and bring with it new challenges over economic growth, energy security, and climate change.”

Oil demand dropped by 1.5 million b/d in the developed world, spurred first by record oil prices and the global economy collapsing. Non-OECD countries also registered slower growth in demand at just 1.1 million b/d.

Hayward said he believes oil prices will hit $60-90/bbl in the future, arguing that oil producers need at least $60/bbl to underpin investment and consumers appeared comfortable with prices beneath $90.

"In the OPEC world, most OPEC countries need prices north of $60-70/bbl to be able to invest in today's capacity, to invest in their social government programs and to invest in tomorrow's capacity. If that price isn't realized, then the first thing that gets cut is tomorrow's capacity."

According to the energy review, worldwide oil production climbed by 0.4% last year.

In 2008, gas consumption crept along, below the decade average at 2.5%. China experienced the fastest rise in gas consumption, reaching a level of 15.8% while US gas consumption rose 0.6% and the UK 3%.

BP said: “Globally, gas production rose 3.8%, above the 10-year trend of 3%. This was driven strongly by the US, which recorded its highest ever annual increase in gas production as strong activity in the development of unconventional gas resources raised output by 7.5%.”

Coal continued for the sixth year as the fastest-growing fuel.

“Our data confirms that the world has enough proved reserves of oil, natural gas, and coal to meet the world’s needs for decades to come,” Hayward said. “The challenges the world faces in growing supplies to meet future demand are not below ground; they are above ground. They are human, not geological.”

Contact Uchenna Izundu at [email protected]