WHY OIL STILL HAS A FUTURE
September 2, 2009
Oil is the single most important source of energy in the world, providing 40 percent of the world's total. However, even as demand increases in developing countries, oil's position in the global economy is being questioned and challenged as never before, says Daniel Yergin, chairman of IHS Cambridge Energy Research Association.
Price volatility is one factor fueling the energy debate. Another is climate change. But even though several developed countries aim to reduce oil consumption, oil's major role in the global economy is likely to be perpetuated by the globalization of demand.
- No longer are the growth markets for petroleum to be found in North America, Western Europe and Japan.
- The demand growth has now shifted, massively, to the fast-growing emerging markets -- China, India and the Middle East.
- Between 2000 and 2007, 85 percent of the growth in world oil demand was in the developing world.
Accordingly, when economic recovery takes hold, what happens in emerging countries will be the defining factor in the path for overall consumption. Yergin's firm, IHS Cambridge Energy Research Association, projects:
- With aggressive sales volumes and no major bumps in the road (unusual for new technologies), plug-in hybrids and pure electric vehicles could constitute 25 percent of new car sales by 2030.
- But because of the slow turn-over of the overall fleet, gasoline consumption would be reduced only modestly below what it would otherwise be.
- Thereafter, of course, the impact could grow, perhaps very substantially.
For the next 20 years at least, the unfolding economic saga in emerging markets will continue to make oil a global growth business. Demand in the developing world trumps new technology, says Yergin.
Source: Daniel Yergin, "Why Oil Still Has a Future," Wall Street Journal, August 31, 2009.
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