Article Summary : Global Oil Demand

Another cause for the decline in oil prices is caused by an increase in consumers purchasing more fuel efficient vehicles, such as hybrid or electric vehicles. In many countries today, especially in North America, there has been an increased demand for fuel efficient vehicles. This is evident in TV commercials which are advertising more and more vehicles that get 40 to 50 miles per gallon, and by the ever increasing commercials for electric vehicles. Consumers are tired of paying outrageous prices for oil and are demanding more for their money. As this demand continues to grow, the demand for oil will decrease.

The reason of the fall in oil prices are the constant change of demand. The need for the oil is actually stagnant. Crude oil is becoming a product of the past. Today, you can harvest energy from solar, wind, water, heat, and waves. According to The Economist, “The use of fossil fuels in the rich world is mostly falling. Emerging economies are not currently taking up the slack”.

The consumption of the oil cause changes in the supply and demand. The United States produces 11 million barrels of oil every day. We are one of the biggest countries to have a big influence on the production and prices of the oil. The basic supply and demand theory explains that the if a product is produced more, the cheaper it should sell. If a country were to double the output of oil day, prices would fall and the Production is high, but the distribution of oil isn’t keeping up with the market. The United States builds an average of one oil refinery per 10 years. This is a net loss due to the fact construction has slowed down since 1970s. Since 1970s, the United States has 8 less oil refineries today. The reason why we are not oversupplied with cheap oil is because of the other countries’ higher net margin and the only operate at 62% of their capacity. Excess capacity is only there to meet future demand. With demand moving accordingly, oil prices will continue to be set mostly by the market — despite external players’ best efforts. (McFarlane)

Oil production is crucial for humans. Overall, 33 out of 48 countries have now hit a peak in oil production, resulting that oil is going to hit a decline in production. This peak is in countries such as Mexico and Russia, potentially signifying the end of the Industrial revolution. However, oil itself is not running out, just the rich, thick oils, that are high quality. In the near future, the only oil that Earth will have will be thin, and not good enough to use in motor vehicles or for electricity. Additionally, cheap and easy to extract oil will be at a decline, and also oil will be in unaccessible places, or within dangerous areas. Oil production needs to stay at pace with the human demand.

It is estimated that 1.3 trillion barrels of oil reserve is left in the world’s major fields (Institution of Mechanical Engineers 2015). At present rates of consumption this will be enough oil to last approximately 40 years. By 2040, it is intended for production levels may be down to 15 million barrels per day which is approximately 20% of the amount of oil which is currently being consumed (Institution of Mechanical Engineers 2015). It is likely by the year 2040 that the world’s population will be twice as large (United States Census Bureau 2015). Additionally, it is likely that more of the world will be industrialized and therefore more dependent upon oil.

This article “Why the Price of Filling Up Has Been Going Down” written by Alan Neuhauser stated that back in 2012. The article analyse fighters with the Islamic State group have seized oil fields, huge swathes of territory and major cities in Iraq and Syria, threatening oil supplies. On normal situation, this is going to threaten markets as it is threaten the supply of oil. Despite of the global unrest the prices at the pump in US are currently at their lowest levels in the year of 2012. According to the article there are several reason which make the price of oil fall, but the main reason which is causing this is the less use of oil crude after the Labor Day.

Modern society will remain dependent on crude oil, even with the development of alternative forms of energy. Oil consumption is vital because many heavy machineries, factories, ships, aircrafts, and automobiles are reliant on crude oil. It is true that efforts are being made (especially within the U.S.) to develop and employ other forms of energy, but, I think that sustainability of such efforts would be a major drawback.

According to the American Public Transport Association (APTA), this amenity grew 37.2 percent over the 18 year time span of 1995-2013. These numbers are nearly double the growth of population at the time, which was 20.3 percent (American Public Transportation Association, 2016). Due to the increased use of transportation, the demand for oil has flourished. Figure 1 shows the demands for different

Since the U.S. is such a prominent oil buyer from--as Corey Flintoff (2012) informs--countries such as Canada, Africa, Latin America, and others, a sudden cease of demand would rock the world’s economy. As of now, the U.S.’ demand of oil is at an equilibrium with the oil being supplied. If the U.S.’ demand of oil dropped dramatically, as Pickens Plan says it should, oil supplying countries would scramble to compensate for lost profits. In theory with the supply-and-demand model, the cost and supply of oil would skyrocket, while demand would be nonexistent. Since oil would be so costly, countries that purchase oil would be unable to afford it anymore, resulting in an even higher increase of prices and steeper decrease of consumers. With the loss of the U.S. as a consumer, the economies of these countries would suffer; this suffering would then spread worldwide, affecting everyone

“Global oil production will continue to grow as conventional supplies are increasingly complemented by unconventional sources to meet demand. Physical production limits (so‐called ‘peak oil’) are unlikely to be reached before 2035.”

According to Domm (2013), the author of the first article, apart from the unrest in Egypt, several other factors such as a plunge in the inventories of domestic crude oil could drive up demand and in the end trigger an increase in the price of gas. In the opinion of the author, although the problems facing Egypt (and Libya) have affected supply

Governments have also begun taxing fuel more heavily to reduce the consumption on petroleum. See Figure 2.4, when the demand for the oil reduce, the consumers will cut back sharply in the quantity demand from Q2 to Q2.

There are two primary factors influenced the market of energy: population and economic output (Exxon Mobil, www.exxonmobil.com). According to International Energy Agency (International Energy Agency, www.oilmarket.org) global oil product demand will rise up from 84.5 mb/d in 2006 to 86.1 mb/d in 2007, and in forecast for 2030 will grow 1.8% per year. The world oil prices are forecasted to decline from $68 per barrel in 2006 to $49 per barrel in 2014, then rise to $59 per barrel in 2030 ($95 per barrel on a nominal basis). Total world liquids consumption rises to 118 million barrels per day in 2030.

World oil demand is increasing as emerging economies need more energy to increase their living standards. Estimates, shown below, are that by 2030, China and India as emerging markets will import over 70% to 90% of their fossil fuel needs (1) . Coupled to a continued high and growing demand for oil, makes this a robust market for the next 30 years.

The article regarding the Future Oil Demand and Supply on the Horizon of 2022, takes into accounts two scenarios related to the future of our world; future oil prices based on the analysis of expected future oil demand and supply in 2022.