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Monday, September 24, 2018

Strong but turbulent energy market in 2003 – BP

2003 saw strong growth both in demand for oil and oil production - and the highest oil prices in 20 years, according to latest BP Statistical Review of World Energy presented in Oslo by the head of BP’s statistical section, Mr. Michael Smith.

Oil prices in 2003 were the highest for 20 years despite world oil production increasing by 3.8% (most oil production growth in 2003 came from OPEC and the Former Soviet Union; excluding the FSU, non-OPEC oil production actually fell). This was higher than the 2.1% increase in demand. The world’s oil reserves continued their long term trend of growing faster than production.

These high prices were not driven by fundamental resource shortages as in 2002. Instead, the low world commercial oil stocks created by the 2002 oil market put extra demands on the 2003 oil market. The necessity of building stocks, geopolitical issues, terrorist attacks, strikes in Venezuela and Nigeria, the shutdown of Japanese nuclear reactors, and the increase in US and Chinese demand were instrumental in generating higher oil prices. China alone accounted for 41% of the 2003 growth in oil demand.

On a question from INTERTANKO regarding OPEC’s wish and need for high oil prices, it was emphasised that world short-term spare oil production capacity is just 2 mbd, mostly controlled by Saudi Arabia. Given today’s political and economical climate, it is not surprising that an oil market operating at 97.5% capacity results in high oil prices.

Contact:  Erik Ranheim