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Wednesday, December 13, 2017

Net inter-regional oil trade to double by 2030, with growth spearheaded by Middle East/Asia, forecasts IEA

According to the International Energy Agency (IEA) World Energy Outlook 2004, which contains projections up to 2030, inter-regional oil trade is due for a sharp increase. As reported in Weekly NEWS No. 45 of 5 November 2004, the reference scenario for oil demand development (1.6% a year global primary oil demand growth from 77 mbd in 2002 to 121 mbd in 2030) is based on the following. Global economic growth is assumed to average 3.2% per year in the period 2002-2030. The world population is assumed to expand from 6.2 billion in 2002 to over 8 billion in 2030. The average IEA crude oil import price is assumed to fall back from current highs to USD 22 (in year 2000 dollars) in 2006, remain flat until 2010, and then begin to climb steadily to USD 29 in 2030.

According to these assumptions and in this reference scenario, net inter-regional oil trade between the major production and consumption regions will reach 65 mbd in 2030 – over half of global oil production and more than twice as much as at present. This trend results from the steady growth in demand in all regions and the increasing concentration of oil production in a small number of countries.

The Middle East, already the biggest exporting region, will see its net exports rise from 17 mbd in 2002 to 46 mbd in 2030. Exports from Africa, Russia, and other transition economies will also continue to expand steadily in the short to medium term, but all of them will have started to decline by 2020. Caspian countries will experience the fastest growth: their exports will rise from 1 mbd in 2002 to 4 mbd in 2030. Despite growing exports from Venezuela, net exports from Latin America as a whole will increase only modestly until 2010 and stabilise thereafter. The increase in trade will be particularly marked after 2010, reflecting the growing share of the Middle East in world oil supply. At 46 mbd, exports from the Middle East will represent more than two-thirds of global trade in 2030. The Middle East will increase its exports to all the major consuming regions, especially developing countries. Flows to developing Asian countries will increase the most.

The IEA notes, however, that higher oil prices would lower OPEC’s market share by stimulating non-OPEC and non-conventional oil production. The IEA comments that the oil prices reached in mid-2004 are unsustainable and that market fundamentals will drive prices down in the next two years. However, a certain combination of factors could keep oil prices high in the years to come. These factors include under-investment in oil supply infrastructure, stronger-than-expected economic growth in Asian countries, oil reserves that are smaller than current estimates, oil reserves that are more difficult to recover, and geopolitical factors.

Should oil prices average USD 35 over the projection period (high oil price case scenario), global oil demand would be around 15% lower - or 19 mbd lower than the 121 mbd reference scenario. A sustained higher oil price would choke off energy demand generally and would prompt switching from oil to other fuels. Higher oil prices would induce behavioural changes – consumers would reduce energy waste and use fewer energy sources – and promote the diffusion of more energy-efficient technologies. With the higher average oil price in the period, oil demand would still rise, but at about 1% per year instead of the 1.6% in the IEA reference scenario.

Contact: Jan Svenne