World oil demand’s shift toward faster growing and less price‐responsive products and regions
Dermot Gately
NYU
Dept. of Economics
[email protected]
Dargay, Joyce M., and Dermot Gately (2010), “World oil demand’s shift toward faster growing and less price‐responsive products and regions”, Energy Policy, 38 (2010), pp. 6261‐6277.
World oil demand has shifted toward products (transport oil) and regions (outside OECD & FSU) that are faster growing and less price‐responsive.
• Most of the demand reductions since 1973‐74 were due to fuel‐switching away from fuel oil (in electricity generation and space heating), especially in the OECD. In addition, the collapse of the Former Soviet Union (FSU) reduced their oil consumption substantially. Neither of these can be repeated.
• The OECD and FSU consumed 86% of world oil in 1971, compared with only 61% today. OECD use of fuel oil was 33% of total world oil in 1973, compared with 9% today.
Conclusions: Worldwide • Most of the easy reductions in demand – fuel‐switching away from residual and heating oil, especially in the OECD – has been accomplished: we have picked the low‐hanging fruit. World oil product demand is now dominated by transport and other oil, which are less price‐responsive and more income‐responsive than residual oil and heating oil. • Similarly, the regional shift of world demand away from the OECD and FSU has the same effect – toward regions whose income growth and income‐elasticities of demand are higher, and whose price‐elasticities are lower, than for the OECD and FSU.
• The rest of the world’s per‐capita oil demand has grown from 0.4 liters/day in 1971 to 1.1 liters/day in 2008, averaging about 2.5% annually. DOE projects that it will grow only to 1.2 liters/day by 2030, averaging 0.6% annually (world total = 107 mbd). Using DOE income & price assumptions, we project it will grow to 1.8 liters/day by 2030, averaging 2.5% annually (world total = 134 mbd). Outline
• Effect of income growth on oil demand
• Much lower responsiveness to recent price increases than to those in the 1970s
• Asymmetric effects on oil demand of price increases and decreases
• Econometric estimation of price and income elasticities of oil demand
• Our projections to 2030 and comparisons to those of DOE, IEA, & OPEC
World Oil Demand since 1971
in million barrels per day
90
Income Growers
& Other Countries
15
World Oil Demand
80
70
60
million
barrels
per day
(mbd)
million
barrels
per day
(mbd)
50
OECD
40
30
Oil
Exporters
10
China
5
20
Former
Soviet
Union
10
0
1970
0
1975
1980
1985
1990
1995
2000
2005
2010
1970
1975
1980
1985
1990
1995
2000
2005
2010
The OECD and FSU consumed 86% of world oil in 1971, compared with only 61% today. Most of the demand reductions since 1973‐74 were due to fuel‐switching away from fuel oil (in electricity generation and space heating), especially in the OECD. In addition, the economic collapse of the Former Soviet Union (FSU) reduced their oil consumption substantially. Neither of these can be repeated.
World oil demand, per‐capita (liters/day)
8
7
6
5
OECD
4
World
3
Former
Sov iet Union
2
Oil Exporters
liters
per day
(log scale)
1
Income Growers
& Other Countries
0.8
0.6
0.5
China
0.4
0.3
0.2
0.1
1970
1975
1980
1985
1990
1995
2000
2005
2010
World Oil Demand, in each of 6 groups of countries
•
•
•
•
•
OECD
China
Former Soviet Union
Oil Exporters: 12 OPEC members + Bahrain, Brunei, Ecuador, Gabon, Oman, Qatar
Income Growing Countries: Chile, Chinese Taipei, Cyprus, Dominican Republic, Egypt, Hong Kong, India, Malaysia, Malta, Myanmar, Pakistan, Singapore, Sri Lanka, Thailand, Tunisia, Vietnam, Yemen
• Other Countries: 49 other countries
Oil Demand, by product
• Transport Oil: Gasoline, Jet Fuel, Diesel (Light Fuel Oil used in Transport)
• Fuel Oil: Residual Oil, Heating Oil (Light Fuel Oil not used in Transport), Kerosene (non Jet Fuel)
• Other Oil: Feedstock (petrochemical inputs: Naphtha and Liquefied Petroleum Gases, LPG), non‐feedstock LPG, and Miscellaneous
Note: the IEA disaggregates Diesel & Heating Oil only for the OECD.
Oil Demand, by product, since 1971
OECD
50
40
Non-OECD
Miscellaneous
Feedstock
40
LPG
30
Feedstock
million
barrels
per day
30
Kerosene
Residual Oil
20
Diesel
million
barrels 20
per day
Heating Oil
10
Gasoline
0
1971 1976 1981 1986 1991 1996 2001 2006
LPG
Kerosene
Residual Oil
Jet Fuel
10
Misc.
Heating Oil + Diesel
Jet Fuel
Gasoline
0
1971 1976 1981 1986 1991 1996 2001 2006
Most of the demand reductions since 1973‐74 were due to fuel‐switching away from fuel oil (in electricity generation and space heating), especially in the OECD. Oil Demand & Income, per‐capita, since 1971
10
9
8
7
6
OECD
1979
Total Oil
1971
5
4
per-capita
oil demand 3
(liters/day)
iequ
al
ion
t
r
po
pro
Non-OECD
1
2008
Total Oil
1989
wth
gro
Transport Oil
1971
per-capita
oil demand
(liters/day)
p
i-pro
equ
2007
ro
nal g
ortio
wth
Diesel
+Heating
Fuel Oil
2
Gasoline
+Jet
Other Oil
Other Oil
Residual
+Kerosene
0.1
1
10
20
per-capita Income (Th. 2000$ PPP)
30
4
5
6
7
8
9
10
per-capita Income (Th. 2000$ PPP)
Income elasticity is >1 or = 1 or <1 depending upon whether movement is steeper/parallel/less‐steep than the diagonal equi‐proportional growth lines (ignoring the effects of price changes).
Oil Demand & Income, per‐capita, since 1971
10
9
8
7
6
OECD
1979
Total Oil
1971
5
4
per-capita
oil demand 3
(liters/day)
iequ
al
ion
t
r
po
pro
Non-OECD
1
2008
wth
gro
Transport Oil
1971
per-capita
oil demand
(liters/day)
p
i-pro
equ
2007
ro
nal g
ortio
wth
Diesel
+Heating
Fuel Oil
2
Gasoline
+Jet
Other Oil
Other Oil
Residual
+Kerosene
0.1
1
10
20
per-capita Income (Th. 2000$ PPP)
Total Oil
1989
30
4
5
6
7
8
9
per-capita Income (Th. 2000$ PPP)
Fuel Oil demand dropped sharply after the price shocks of the 1970’s, kept dropping even when oil prices collapsed in the 1980s. It has been substantially eliminated. Transport & Other Oil have been increasing almost as fast as income, especially outside the OECD & FSU.
10
Two oil‐price quintuplings: much smaller price‐responsiveness
of oil demand in 1998‐2008 than in 1973‐84
1973
% change 1998
1973‐1984
$96.62 (1980)
504%
$17.32
$97.26
% change 1998‐2008
461%
$22.7
$27.3
20%
6.66
1.52
23%
3.45
52%
63%
14%
6.33
1.06
17%
3.71
59%
56%
9%
‐3%
27%
20%
12%
$3.5
0.92
0.21
23%
37%
8%
$5.8
1.14
0.18
16%
44%
7%
66%
23%
‐17%
$5.9
16%
$7.2
$9.8
35%
2.05
0.45
‐13%
2.05
0.31
15%
2.11
0.23
11%
3%
1984
Crude Oil Price (2007 $/b) $16.01
OECD
Real Income per capita (Th.$)
$14.3
$17.0
20%
5.98
1.89
‐19%
Fuel Oil per capita (liters/day) (a)
Fuel Oil share of Total OECD Oil
Transport Oil per capita
product share of Total Oil, OECD
OECD share of Total World Oil
OECD Fuel Oil share of Total World Oil
7.27
3.28
45%
2.60
36%
73%
33%
Non‐OECD
Real Income per capita (Th.$)
Total Oil per capita (liters/day)
Residual Oil per capita (liters/day) *
Residual Oil share of Total Non‐OECD Oil
Non‐OECD share of Total World Oil
Non‐OECD Residual Oil share of Total World Oil
$2.3
0.78
0.27
32%
27%
9%
$2.9
0.94
0.30
Real Income per capita (Th.$)
$5.1
Total Oil per capita (liters/day)
2.37
0.66
28%
Total Oil per capita (liters/day)
‐42%
32%
2.71
4%
45%
63%
20%
31%
37%
12%
2008
‐30%
8%
World
Residual Oil per capita (liters/day) (b)
Residual Oil share of Total World Oil
‐32%
22%
‐24%
OECD: Oil demand & Income, per‐capita, 1971‐2008
10
9
8
7
6
OECD
1979
Total Oil
2008
1971
5
4
per-capita
oil demand 3
(liters/day)
eq
tion
r
o
rop
ui-p
wth
o
r
al g
Transport Oil
Fuel Oil
2
Other Oil
1
10
20
per-capita Income (Th. 2000$ PPP)
30
10
9
8
7
6
OECD
1979
Total Oil
2008
1971
5
4
OECD
per-capita
oil demand 3
(liters/day)
eq
ow
l gr
a
n
tio
por
o
r
ui-p
th
Transport Oil
Fuel Oil
2
Other Oil
1
10
20
30
OECD per-capita Income (Th. 2000$ PPP)
2008
1980
$100
$90
$80
$70
$60
1974
$50
$40
Real Price
Crude Oil $30
(2008$/b)
2003
1986
$20
1997
1973
1971
Price: 1971-2008
$10
10
20
30
OECD per-capita Income (Th. 2000$ PPP)
• 1. In the 1970s, oil prices increased and we reduced Fuel Oil demand. Been there, done that.
10
9
8
7
6
OECD
1979
Total Oil
2008
1971
5
4
OECD
per-capita
oil demand 3
(liters/day)
eq
ow
l gr
a
n
tio
por
o
r
ui-p
th
Transport Oil
Fuel Oil
2
Other Oil
1
10
20
30
OECD per-capita Income (Th. 2000$ PPP)
2008
1980
$100
$90
$80
$70
$60
1974
$50
$40
Real Price
Crude Oil $30
(2008$/b)
2003
1986
$20
1997
1973
1971
Price: 1971-2008
$10
10
20
30
OECD per-capita Income (Th. 2000$ PPP)
• 1. In the 1970s, oil prices increased and we reduced Fuel Oil demand. Been there, done that.
• 2. In the 1980s, oil prices collapsed but we kept reducing Fuel Oil demand. Been there, did not un‐do that; in fact, kept doing that. 10
9
8
7
6
OECD
1979
Total Oil
2008
1971
5
4
OECD
per-capita
oil demand 3
(liters/day)
eq
ow
l gr
a
n
tio
por
o
r
ui-p
th
Transport Oil
Fuel Oil
2
Other Oil
1
10
20
30
OECD per-capita Income (Th. 2000$ PPP)
2008
1980
$100
$90
$80
$70
$60
1974
$50
$40
Real Price
Crude Oil $30
(2008$/b)
2003
1986
$20
1997
1973
1971
Price: 1971-2008
$10
10
20
30
OECD per-capita Income (Th. 2000$ PPP)
• 1. In the 1970s, oil prices increased and we reduced Fuel Oil demand. Been there, done that.
• 2. In the 1980s, oil prices collapsed but we kept reducing Fuel Oil demand. Been there, did not un‐do that; in fact, kept doing that. • 3. From 1997 to 2008, oil prices quintupled and we reduced Fuel Oil demand still further. Been there, done that again.
10
9
8
7
6
OECD
1979
Total Oil
2008
1971
5
4
OECD
per-capita
oil demand 3
(liters/day)
eq
ow
l gr
a
n
tio
por
o
r
ui-p
th
Transport Oil
Fuel Oil
2
Other Oil
1
10
20
30
OECD per-capita Income (Th. 2000$ PPP)
2008
1980
$100
$90
$80
$70
$60
1974
$50
$40
Real Price
Crude Oil $30
(2008$/b)
2003
1986
$20
1997
1973
1971
Price: 1971-2008
$10
10
20
30
OECD per-capita Income (Th. 2000$ PPP)
• 1. In the 1970s, oil prices increased and we reduced Fuel Oil demand. Been there, done that.
• 2. In the 1980s, oil prices collapsed but we kept reducing Fuel Oil demand. Been there, did not un‐do that; in fact, kept doing that. • 3. From 1997 to 2008, oil prices quintupled and we reduced Fuel oil demand still further. Been there, done that again.
• 4. Eventually, when oil prices increase again, we won’t be able to re‐do what we didn’t un‐do. Been there, done that almost completely, cannot keep re‐doing that.
10
9
8
7
6
OECD
1979
Total Oil
2008
1971
5
4
OECD
per-capita
oil demand 3
(liters/day)
eq
ow
l gr
a
n
tio
por
o
r
ui-p
th
Transport Oil
Fuel Oil
2
Other Oil
1
10
20
30
OECD per-capita Income (Th. 2000$ PPP)
2008
1980
$100
$90
$80
$70
$60
1974
$50
$40
Real Price
Crude Oil $30
(2008$/b)
2003
1986
$20
1997
1973
1971
Price: 1971-2008
$10
10
20
30
OECD per-capita Income (Th. 2000$ PPP)
China: Oil Demand & Income, per‐capita, 1971‐2007
Total Oil
1
2007
China
Other Oil
Gasoline+Jet
per-capita
oil
0.1
demand
(liters/day)
1971
Residual+Kerosene
u
eq
0.01
o
op
r
i-p
na
o
i
rt
t
ow
r
lg
h
1
per-capita Income (Th. 2000$ PPP)
10
For 25 years oil demand (except Resid) has increased almost as fast as income.
Income Growers: Oil Demand and Income, per capita, 1971‐2007
1
2007
Total Oil
Other Oil
Residual
+Kerosene
1971
per-capita
oil
0.1
demand
(liters/day)
Gasoline+Jet
eq
For 35 years oil demand (except Resid) has increased almost as fast as income.
th
ow
r
g
nal
o
i
t
por
o
r
ui-p
Income Growers
0.01
1
2
3
4
5
6 7 8 9 10
per-capita Income (Th. 2000$ PPP)
Income Growers: Chile, Chinese Taipei, Cyprus, Dominican Republic, Egypt, Hong Kong, India, Malaysia, Malta, Myanmar, Pakistan, Singapore, Sri Lanka, Thailand, Tunisia, Vietnam, Yemen. Oil Exporters: Oil Demand & Income, per‐capita, 1971‐2007
2007
Total Oil
Oil
Exporters
1
2007
1
1971
Other Oil
per-capita
oil
demand
(liters/day)0.1
1971
Gasoline+Jet
Residual
+ Kerosene
0.1
l grow
portiona
equi-pro
l growth
portiona
ro
p
iu
q
e
th
0.01
0.01
2
3
4
per-capita Income (Th. 2000$ PPP)
5
2
3
4
per-capita Income (Th. 2000$ PPP)
Oil Exporters: 12 OPEC members + Bahrain, Brunei, Ecuador, Gabon, Oman, Qatar
For 35 years oil demand (except Resid) has increased as fast as income when income has grown, and it increased even when income declined.
5
Former Soviet Union: Oil Demand & Income, per‐capita, 1990‐2007
Former
Soviet
Union
10
Total Oil
1990
1990
2007
2007
1996
per-capita
oil
1
demand
(liters/day)
1996 Gasoline+Jet
+Other Oil
1996
1990
Residual+Kerosene
2007
rowth
g
l
a
n
o
roporti
equi-p
0.1
4
5
6
7
8
9
per-capita Income (Th. 2000$ PPP)
10
For the past decade, Total Oil has been flat, as declining demand for Residual Oil has offset increases in Transport & Other Oil. But soon the growth of Total Oil will be dominated by increases in Transport & Other Oil, as Residual Oil is largely eliminated.
Other Countries: Oil Demand & Income, per‐capita, 1971‐2007
2
per-capita
oil
demand
(liters/day)
Other Countries
th
al grow
n
o
i
t
r
o
op
equi-pr
Total Oil
1
0.9
0.8
0.7
0.6
Per‐capita oil demand has been relatively flat, due to sluggish income growth; declining
Residual Oil has offset growth in other oil demand.
2007
1971
Other Oil
0.5
0.4
0.3
Gasoline
+ Jet Fuel
0.2
Residual+Kerosene
0.1
3
4
5
per-capita Income (Th. 2000$ PPP)
49 Other Countries: 19% of world population, 8% of oil demand, 5% of demand growth since 2000
Asymmetric vs. symmetric response
of demand to changes in price
$60
Real Oil Price
$50
$40
year 2
year 2
symmetric
asymmetric
year 4
year 4
$30
$20
$10
$0
2.5
year 3
year 3
year 1
3
3.5
4
Per-capita Oil Demand
year 1
4.5
Crude Oil Price and OECD oil demand/GDP, by product, 1971‐
2008
2008
$100
2008
$100
1980
$80
$80
$80
Crude $60
Oil
Price $40
Crude $60
Oil
Price $40
Crude $60
1974 Oil
Price $40
1974
2004
2004
'86
$20
1998
1973
1974
2004
1986
1998
$0
1971
1973
1
ratio of Transport Oil to GDP
1.5
$20
1973
1998
1971
$0
0.5
1980
1986
$20
1971
0
2008
$100
1980
$0
0
0.5
1
ratio of Fuel Oil to GDP
1.5
0
0.5
ratio of Other Oil to GDP
1
Decomposition of oil price into 3 series, to estimate the effect of each on demand
5
Pmax
4
3
2
1
log Price Crude Oil
(2008 $)
Prec
0
-1
-2
Pcut
-3
1971 1976 1981 1986 1991 1996 2001 2006
Per‐capita demand equation
(in logarithms)
D c,t = k1c + (θp + θy) * D c,t‐1 ‐ (θp*θy) * D c,t‐2
+ βmPmax, t + βcPcut, t + βrPrec, t ‐ θy * ( βmPmax, t‐1 + βcPcut, t‐1 + βrPrec, t‐1 )
+ γmYmax,c,t +γcYcut, c,t + γrYrec, c,t ‐ θp* ( γmYmax, c,t‐1 +γcYcut, c,t‐1 + γrYrec, c,t‐1 )
Price and Income are each decomposed into 3 series
Separate speeds of adjustment to changes in price and income: θp & θy
Long‐run elasticities of oil demand estimated from our best specification
Country
Group
Oil Product
Total Oil
Fuel Oil: Residual + Kerosene + Heating
OECD
Transport Oil: Gasoline + Jet Fuel + Diesel
Other Oil
Total Oil
Income
Residual + Kerosene
Growers
Gasoline + Jet Fuel
Other Oil
Total Oil
Residual + Kerosene
China
Gasoline + Jet Fuel
Other Oil
Total Oil
Oil
Residual + Kerosene
Exporters
Gasoline + Jet Fuel
Other Oil
Total Oil
Former
Residual + Kerosene
Soviet
Gasoline + Jet Fuel
Union
Other Oil
Total Oil
Other
Residual + Kerosene
Countries
Gasoline + Jet Fuel
Other Oil
symmetric
Income
0.80
0.56
0.91
1.11
0.87
0.49
0.92
1.17
0.74
0.02
0.74
0.98
Long-run elasticities of demand
Income
Price of Crude Oil
symmetric
asymmetric
asymmetric
Ymax
Ycut
Yrec
Price
Pmax
Pcut
-0.60
-0.20
-1.67
-0.59
-0.22
-0.21
-0.27
-0.18
-0.07
-0.79
-0.40
-0.08
-0.07
1.00
0.00
1.01
1.06
0.34
-0.17
0.39
0.23
0.70
-1.02
0.79
0.57
1.00
0.27
1.03
1.30
1.03
1.53
1.16
0.98
0.39
0.74
0.34
0.54
Prec
-0.29
-1.20
-0.30
-0.31
-0.37
0.43
-0.61
0.50
0.60
-0.12
-0.07
-0.13
-0.07
-0.04
0.01
-0.04
-0.06
-0.01
-0.03
-0.01
-0.003
Long‐run elasticities of oil demand
used in our projections
Transport & Other Oil
Fuel Oil
‐0.30
‐0.15
‐0.15
0
‐0.15
‐0.15
‐1.2
‐0.6
‐0.6
0
‐0.6
‐0.6
0.50
0.90
0.75
1.00
0.60
0.90
0
0
0
1.0
0
0
Price elasticity
OECD
Income Growers
China
Oil Exporters
FSU
Other Countries
Income elasticity
OECD
Income Growers
China
Oil Exporters
FSU
Other Countries
Projections of per‐capita oil liquids demand to 2030 using DOE Ref. Case assumptions for crude oil prices & income growth: DOE projections (107 mbd in 2030) and Our projections (134 mbd)
DOE projections
8
7
6
Our projections
8
7
6
5
OECD
5
4
FSU
4
FSU
3
OECD
3
liters 2
p er day
(lo g scale)
FSU
World
World
1
0.9
0.8
0.7
0.6
Rest of World
0.4
1980
1990
2000
2010
2020
2030
DOE: This time it’s different.
Annual % demand growth:
2.54% historically, but only 0.56% in future (despite faster income growth)
Rest of World
0.4
1970
World
1
0.9
0.8
0.7
0.6
0.5
0.5
1970
liters 2
per day
(log scale)
1980
1990
2000
2010
2020
2030
Dargay‐Gately: The next 20 years will be like the last 40 years.
Oil Demand: Historical 1971‐2008 and Projections to 2030, by region FSU
Rest of World
World
OECD
per capita
per capita
per capita
per capita
total oil total oil total oil total oil demand oil
GDP demand oil
GDP demand oil
GDP demand oil
GDP
liters Th.$ liters Th.$ liters Th.$ liters Th.$ mbd
mbd
mbd
Units mbd
/day
/year
/day
/year
/day
/year
/day
/year
Historical Data
1971
2008
average % growth rate, 1971‐2008
Projections for year 2030
DOE, IEO (2009) Reference Case
average % growth rate, 2008‐2030
IEA (2008) Reference Case
average % growth rate, 2008‐2030
OPEC (2009) Reference Case
average % growth rate, 2008‐2030
Our Reference Case 3‐product projections
average % growth rate, 2008‐2030
36.6
47.6
0.7%
6.6
6.4
‐0.1%
13.0
27.3
2.0%
5.3
4.1
‐0.7%
3.5
2.3
‐1.1%
6.8
10.0
1.1%
6.7
33.2
4.4%
0.4
1.1
2.54%
1.6
5.6
3.4%
48.7
84.9
1.5%
2.1
2.1
0.0%
4.7
9.8
2.0%
50.0
0.2%
43.9
‐0.4%
43.4
‐0.4%
51.3
0.3%
6.1
‐0.2%
5.3
‐0.8%
5.3
‐0.9%
6.2
‐0.1%
39.9
1.7%
38.3
1.6%
35.9
1.3%
39.9
1.7%
5.5
1.3%
5.9
1.6%
6.1
1.8%
5.7
1.4%
2.7
0.7%
2.9
1.0%
3.0
1.2%
2.8
0.9%
23.0
3.9%
19.7
3.1%
14.6
1.7%
23.0
3.9%
51.1
2.0%
56.6
2.5%
56.1
2.4%
77.2
3.9%
1.2
0.56%
1.3
1.03%
1.3
0.99%
1.8
2.47%
12.8
3.9%
10.7
3.0%
10.8
3.0%
12.8
3.9%
106.6
1.0%
106.4
1.0%
105.6
1.0%
134.2
2.1%
2.0
‐0.2%
2.0
‐0.2%
2.0
‐0.2%
2.6
0.9%
16.9
2.5%
15.4
2.1%
14.4
1.8%
16.9
2.5%
DOE and our projections assume that real price recovers gradually, from about $60 in 2009 to $110 in 2015 and $130 by 2030. IEA(2009) assumes $100 by 2020 and $115 by 2030. OPEC(2009) assumes nominal prices in the range of $70 to $100. Oil demand includes liquids such as biofuels.
Conclusions: Countries outside the OECD & FSU
• Countries outside the OECD and FSU are likely to have faster income growth
• Their demand for transport oil and other oil (excluding residual oil) is likely to grow almost as fast as their income
• Their oil demand growth has not been slowed very much by crude oil price increases in the past
Conclusions: Worldwide • Most of the easy reductions in demand – fuel‐switching away from residual and heating oil, especially in the OECD – has been accomplished: we have picked the low‐hanging fruit. World oil product demand is now dominated by transport and other oil, which are less price‐responsive and more income‐responsive than residual oil and heating oil. • Similarly, the regional shift of world demand away from the OECD and FSU has the same effect – toward regions whose income growth and income‐elasticities of demand are higher, and whose price‐elasticities are lower, than for the OECD and FSU.
• The rest of the world’s per‐capita oil demand has grown from 0.4 liters/day in 1971 to 1.1 liters/day in 2008, averaging about 2.5% annually. DOE projects that it will grow only to 1.2 liters/day by 2030, averaging 0.6% annually (world total = 107 mbd). Using DOE income & price assumptions, we project it will grow to 1.8 liters/day by 2030, averaging 2.5% annually (world total = 134 mbd). Conclusions: Price and Income
• Given the price & income assumptions of DOE & IEA, their oil demand projections grossly underproject the likely rate of oil demand growth outside the OECD & FSU.
• World oil demand’s response to price increases will be smaller in the future than it has been in the past. • Oil prices are likely to be considerably higher, and/or income growth lower, than what is projected by DOE, IEA & OPEC. (We are NOT projecting world oil production will be 134 mbd in 2030, nor that the world will actually be consuming that amount of oil in 2030.)
• Oil price shocks, similar to what happened in 2004‐2008, are likely to re‐occur. Prices will have to go much higher in order to balance demand and supply.
e‐mail: [email protected]
website: www.econ.nyu.edu/dept/courses/gately/index.htm
References
Data
British Petroleum (BP). Statistical Review of World Energy, June 2009. http://www.bp.com/statisticalreview
International Energy Agency (IEA, 2009). Energy Statistics of OECD Countries, Paris, 2009
‐‐‐‐‐, Energy Balances of Non‐OECD Countries, Paris, 2009
‐‐‐‐‐, Energy Prices and Taxes, Paris, 2009
Projections:
US Department of Energy (2009). International Energy Outlook 2009. Washington.
International Energy Agency (IEA, 2009). World Energy Outlook 2009. Paris.
OPEC (2009), World Oil Outlook 2009, Vienna.
Other Papers
Gately, Dermot and Hillard G. Huntington (2002).
“The Asymmetric Effects of Changes in Price and Income on Energy and Oil Demand.” The Energy Journal 23(1): 19‐55
Dargay, Joyce M., Dermot Gately and Martin Sommer (2007). “Vehicle Ownership and Income Growth, Worldwide: 1960‐2030.” The Energy Journal 28(4): 163‐190.