(EnergyAsia, October 28, Wednesday) — Developed countries, which account for 54% of world oil consumption, likely reached their demand peak in 2005, according to a new research report by IHS Cambridge Energy Research Associates (CERA).
While world oil demand is now set to grow as the world economy moves from recession to recovery, the demand lost in 30 developed countries that make up the Organisation for Economic Cooperation and Development (OECD) is not likely to ever be regained, said the report.
IHS CERA chairman Daniel Yergin, said: “The economic downturn has been masking a larger trend in the oil demand of developed countries. The fact is that OECD oil demand has been falling since late 2005, well before the Great Recession began.”
The report said OECD demand is unlikely to top its 2005 peak as fuel consumption in the transportation sector, which accounts for 60% of the group’s oil market, is likely to flatten out after years of steady growth. Oil demand outside the transportation sector has already been relatively flat since 1980.
It said several long-term factors will contribute to the oil demand bust including:
* Demographic and socioeconomic changes – Vehicle ownership rates in developed countries have reached a “saturation” level while aging populations with low to negative population growth suggests a flattening of demand for mobility. The growth of women’s participation in the labor force is also leveling off, meaning the flattening of another source of demand growth.
* Stronger governmental and consumer push for passenger vehicle fuel economy gains – Energy security concerns and climate change initiatives have led OECD governments to tighten fuel economy standards. The rise in energy prices over the past several years has pushed consumers to value increased efficiency and the auto industry through a major reorientation toward greater efficiency.
* Greater penetration of alternative fuels and vehicle technologies – Governments across the OECD continue to favour mandates that increase the share of alternative fuels in the transportation sector. New technologies such as plug-in hybrid electric vehicles and next-generation biofuels could also have a greater impact in the future.
“Petroleum for transportation has been the single driving force behind OECD oil demand for the past two decades,” said Aaron Brady, IHS CERA director for Global Oil. “After the oil crisis of the early 1980s the nontransportation sector turned to readily available substitutes like coal, gas or nuclear power. Now we are seeing the tempering of the last significant driver of oil demand in developed countries—petroleum for transportation.”
Future world oil demand growth will be driven almost exclusively by emerging markets. The latest IHS CERA World Oil Watch expects oil demand to increase from 83.8 million bd/ in 2009 to 89.1 million b/d in 2014, with 83% (4.4 million b/d) coming from non-OECD countries.
IHS CERA said China alone is expected to account for 1.6 million b/d of cumulative growth. Just 900,000 b/d of growth is expected to come from OECD countries, with a fraction of the 3.7 million b/d of demand lost over the course of 2005 to 2009.