The Oil Industry

The reserves of the world oil industry stand at over 1.15 trillion barrels and are concentrated in the Middle East (63 percent) and in Europe and Eurasia (9.5 percent). The major oil consuming regions are North America, Asia Pacific — where China, Japan, India and South Korea dominate consumption — Europe and Eurasia. The US oil industry is the world’s biggest, accounting for 25 percent of oil consumption and 24 percent of gas consumption.

OPEC continues to dominate the world oil market although confidence in its ability to ensure a regular supply and to peg prices at moderate levels has been shaken owing to the recent runaway increase in oil prices.

In 2004, China became the second biggest oil consumer in the world, outpacing Japan.  According to oil statistics it accounted for 7.6 percent of total world demand while Japan’s share the remained at 6.8 percent.

Oil prices are rising, touching a 21-year high of USD56 in the last week of October 2004. The spike in oil prices is due to strong global GDP growth, high Chinese consumption, OPEC’s low crude stock supply and concerns over seasonal product shortage, the falling US dollar, geopolitical tensions in the Middle East and Nigeria and speculation.

Worldwide refining margins have been improving. In the last two decades, the capacity utilization rate has improved from 76 percent in 1984 to 85 percent in 2003 worldwide. This is due to higher crude prices resulting in better final petroleum-product prices, leading to an improved refining margin.

With the global economy rebounding, the prospects for the oil and gas industry are looking up. Major growth drivers for the oil industry include strong world GDP growth, increased use of fuel in the industrial and transportation sectors and climatic conditions.

Worldwide renewable energy use is projected by the Energy Information Administration (EIA) to increase from 33quadrillion BTUs (9 percent of primary energy production in 2000) to 50 quadrillion BTUs (8 percent) in 2020.

The trend of deregulation in developed markets has already resulted in several mega mergers and will lead to more mergers and acquisitions. Tightening emission standards and growing environmental activism is forcing oil producers to clean up their act. Stringent vehicular emission standards are also forcing oil and gas companies to come up with cleaner products.

The privatization of state-owned oil companies in emerging markets will provide global oil companies with an opportunity to gain a strong presence in fast-growing markets.

Demand and supply in the oil industry

In five years from 1999 to 2003, oil demand rose by 0.91 percent while supply increased by 1.28 percent. Yet supply has not been able to match oil demand worldwide because a considerable gap already exists between demand and supply, see. Any new supply only goes towards reducing the existing gap between demand and supply. Major incremental demand is coming from Asia Pacific and Africa, while additional supply is being added by Europe, Eurasia and the African regions.

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