Through Friday, the average price of regular unleaded at US pumps has risen nearly 25 cents to $3.59 a gallon in two weeks, a 7.5 percent increase, according to the Lundberg Survey.
Refinery closures and outages have played a role, but so too has the surge in the price of Brent crude to a nine-month high above $118 a barrel.
The runup has been aided by Iran’s continued intransigence on its nuclear program, as well as recent news that the Seaway pipeline will not deliver as much crude as previously hoped this year from the North American interior to ports along the US Gulf Coast.
But none of these circumstances would matter as much were it not for the one energy-markets constant that has obtained through thick and thin, expansion and recession. And that’s the fact that demand from emerging markets has proven surprisingly resilient to economic shocks and supply-driven price spikes.
Notably, China’s crude imports in January were up 7.4 percent year-over-year, and while stockpiling ahead of the Chinese New Year holiday may account for some of the increase, demand is expected to perk up again this spring as China’s economy continues to recover from last year’s slowdown.
Developing countries are expected to increase their consumption of crude and liquid fuels by another 3 percent this year, while developed countries once again trim their use, according to the US Energy Information Administration (EIA). Next year, demand from the developing world is expected to exceed that from developed countries for the first time ever. And by 2035 the developing world is likely to account for some two-thirds of the global oil consumption, according to the EIA.
Source: US Energy Information Administration
The demand growth in China, India and across Asia and South America might at first seem odd given the high and rising oil prices. But consider how little energy many of these developing countries use at present.
The average human consumed just 4.7 barrels of oil per year in 2010. That was 54 percent lower than what was consumed by the average European and 79 percent below the per-capita use in the US.
Developing countries presently consume far less per capita. In the first decade of this century, Chinese energy consumption rose 79 percent, to all of 2.5 barrels per person per year. At that growth rate — and assuming China’s population remains constant — China would reach the current global per-capita average soon after 2020.
This would require an extra 8 million barrels of oil per day, either from diminished use elsewhere or, alternatively, a 10 percent increase in global output. And if the average Chinese consumed as much crude as the average American, China would need 82 million barrels of oil per day — more than 90 percent of the current global output.
And China, of course, is not the only developing country with a rapidly growing appetite for energy. Saudi crude consumption has been compounding at a 6 percent annual rate for the past decade, while its peak power demand has been rising by 8 percent annually. At that rate, the kingdom could turn into a crude importer by 2030, by one estimate.
American consumers faced with costly gasoline have curbed trips to the mall and the Sunday drives. Their counterparts in emerging markets will be less likely to idle the recently bought first family car or to return a washing machine as electricity rates rise. Many are still seeing their income grow rapidly. Almost all are benefiting from government fuel subsidies or price controls. This is why China, Brazil and Saudi Arabia will continue to push energy prices higher in the long run.
The good news for energy consumers in advanced economies is that improved fuel efficiency has helped cut down on energy use with relatively little pain. Besides, the shale drilling boom now underway in the US could turn this country into an oil exporter one day soon, and has already made lots of discounted crude available to domestic refiners.
But prices at the pump will continue to depend heavily on the demand on far-off Rio and Beijing. Emerging-markets consumers want their fair share of the global energy budget, and won’t be denied.
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