World energy demand in 2007

9 Jun 2008

How high oil prices impact the global energy demand?

The growth of energy demand continued to accelerate in 2007 despite soaring prices, to reach 2,8 % (+ 0,3 point compared to 2006).
This evolution results from two diverging trends: a shrink in energy consumption in most of OECD countries, except North America, and a strong increase in emerging countries.

  • Within the OECD, two contrasting trends can be reported, that compensate each other partially: the reduction of energy consumption in Japan (-0.8%) and in Europe (-1.2%), particularly significant in the EU-15 (-1.9%); the increase of energy consumption in North America (+2%). Globally, the OECD overall consumption continued to increase slightly (+0.5%), while electricity increased faster (2,1%) and fuels remained stable.
  • Elsewhere, the strong energy demand growth remained very dynamic (+5% for the total demand, 8% for electricity only), driven by China (+7.3%).

The world oil demand increased by 1% only, but the demand has focused even more on captive end usages, transports & petro chemistry. The world gasoline & diesel demand increased by around 5,7% in 2007,  and represents 53% of the total oil products demand in 2007 (51% in 2006).
If gasoline & diesel consumption remained quasi-stable within OECD countries, the growth has been extremely strong in the emerging countries, despite booming oil prices.
There are mainly two factors explaining this evolution where both oil demand and oil prices increased:

  • Weak elasticity-prices to the demand in transport and petro chemistry sectors
  • Disconnection of domestic fuel prices in major emerging countries (China, India, Latin America) compared to world oil market prices

Another striking point is that world crude oil & condensate production remained almost stable in 2007, hence the entire demand growth was supported by destocking.
During the same period, the OPEC production decreased by 1%, mainly due to the production decrease in Saudi Arabia, that is probably more incurred than wanted. That would explain the repetitive warnings from Saudi Arabia about the market being correctly supplied, and that there was no “physical” reasons for price increases, then that the market “had become crazy”.
The world demand of natural gas increased strongly in 2007 to reach 4,7% (3,6% in 2006).
The coal demand growth also remained very vigorous (4,7%). The key driver for gas and coal strong increases is power generation. It increased by 4,7% in 2007, representing an additional 900 TWh, of which 400 TWh in China: power generation from gas increased by 8,6 % (+330 TWh) and from coal +5% (+330 TWh).