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India’s Growth Spurs Oil Demand

September 26, 2016
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By Paul Homewood 

 

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http://www.bloomberg.com/news/articles/2016-09-26/india-growing-8-a-year-seen-by-citi-helping-oil-gold-demand

 

From Bloomberg:

 

India has become the center of the world’s oil demand growth and the country’s economic growth will affect global commodities, Citigroup Inc. said in a research note.

The world’s second-largest country by population after China will see its economy expand at about 8 percent a year through 2021, Citi researchers including Ed Morse said. The country’s working-age population will increase by 220 million over the next 20 years, and about 240 million people will move to cities.

 

 

Urbanization and rising incomes will boost demand for transportation fuels, gold jewelry and electricity generation, while looser regulations should spur increased exports of iron ore into the market. India’s economy won’t copy China’s near-decade of double-digit economic growth that pushed oil prices into the $100-a-barrel range, but will be enough to impact global supply-and-demand balances of several commodities, Morse said.

“While India is no China, the sub-continent’s largest economy is becoming the third largest oil consumer and importer of oil, with a tangible impact on oil, coal and iron ore markets, less so on metals,” Morse said. “As India’s base rises, so too should its global commodities’ impacts.”

Citi expects 2016 to be the best in four years for commodity investments. The Bloomberg Commodity Index is up 7.4 percent this year. Oil, zinc, copper and soft commodities will be the best investments in 2017, with Brent crude seen averaging $60 a barrel after ending this year around $50.

India’s crude demand has grown by 350,000 barrels a day this year, higher than China, as the country surpassed Japan to be the world’s third-largest oil buyer. Gasoline demand has risen 14 percent this year and should continue to increase at double-digit rates as car and motorcycle purchases climb, Morse said.

 

 

Coal demand will grow between 6 percent and 8 percent a year through 2020 as the country tries to electrify more rural areas. Domestic production of coal for power will rise even faster, reducing imports, while a strong domestic steel-production outlook means the nation will have to increase metallurgical coal imports.

http://www.bloomberg.com/news/articles/2016-09-26/india-growing-8-a-year-seen-by-citi-helping-oil-gold-demand

 

The second graph is particularly, illustrating how global oil demand will continue growing through 2040, fuelled by India and China.

Oil production last year amounted to 91 million barrels a day, so, according to the IEA figures, we are looking at something like a 15% increase by 2040.

 

 

 

“Experts” like Mark Carney and Ambrose Evans-Pritchard tell us that oil will soon become a stranded asset.

7 Comments leave one →
  1. Mike Higton permalink
    September 26, 2016 3:58 pm

    In the second graph US demand is shown as declining by 2040 which seems surprising unless there are some underlying assumptions about a massive switch to other energy sources.

    • John F. Hultquist permalink
      September 26, 2016 4:14 pm

      What does -4M barrels per day “oil demand growth” mean?
      Does it mean an absolute decline?
      Does it mean growth is ongoing, but slowing?

      Recently one report claimed “to save the world” no gas autos should be produced after 2035 and all such should be retired by 2050. Not that it will happen.

      Whose assumptions are we to use?

      • September 26, 2016 4:53 pm

        JH, beyond 2025 it is not oil demand, but rather cruse oil supply, that will be constrained. Have written parts of two books about this, published in early 2012 (Gaia’s Limits) and late 2014 (Blowing Smoke). Both available at iBooks or Amazon Kindle.

    • Billy Liar permalink
      September 26, 2016 4:44 pm

      I think the US demand decline reflects the switch to solar powered, self-crashing Tesla cars.

      /sarc

  2. September 26, 2016 4:49 pm

    It will likely not be possible for India to boost oil comsumption that much by then. Demand may be there, but not supply. The peak in global production of conventional oil happened ~2007, and the current average decline rate in existing fields is ~7%/yr (IEA survey of 800 fields producing >2/3 of all crude). Conventional defined as API>10, from reservoir porosity >5% and permeability >10milliDarcies. The peak in annual production of all crude including shale (e.g. US), bitumen (Athabasca) and tar (Orinoco) almost certainly comes by 2025. Details in several energy related essays in ebook Blowing Smoke.
    The Saudi gambit to punish US shale doesn’t change the long term picture. About 75% of all oil of all types ever to be discovered has been (basin creaming curves or probit transforms). In the past 50 years, conventional recovery factors have only increased ~25 percent; for the 800 major fields the average is now ~35%. For all conventional fields it is 26%. US shale averages ~1.5% and may get to 3% with more proppant loading, plug n perf replacing sleeve perf, and tighter lateral spacing. Using SAGD, the deep bitumen recovery factor is 20-25%.
    Peak production isn’t about how much oil exists, it is about how much you can actually extract at what rate. Maximum extraction requires slowing the annual rate as fields age. This is called the field decline (rate) curve. It is managed in conventional fields but happens naturally with shale. ~85% decline from initial production level in 36-48 months. Which is why the global crude glut won’t last through 2017.

    • John F. Hultquist permalink
      September 26, 2016 8:06 pm

      You did not answer my question regarding:
      What does -4M barrels per day “oil demand growth” mean?

      Your long comment here is interesting but does not get to the heart of the matter.
      I agree that the mix of energy in the future will be different than now, as is true of the past – when horses/hay provided power for transportation and other work. How things will be done 50 years from now is not known. Still, I think there will be a long tail for the use of Carbon/Hydrogen as a power source.
      I expect to check-out about 2030 plus or minus a few years, so I won’t know what happens.

      • September 27, 2016 2:53 am

        JH, my answer was basically that you asked the wrong question.
        But to answer your ‘wrong’ question, makes no sense. Oil demand only grows. Has for over 100 years. The only question is how fast. Any historic short demand dips are associated with recessions. So -4mbpd makes no sense absent some drastically horrific negative economic assumptions. Oil isnt used for electricity most places. It is a short term inelastic transportation fuel ~75%. Rest is lubricants, petrochems, and asphalt.

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