The latest data on oil consumption suggest the dip in consumption that appeared in 2008 after the global financial crisis quickly reversed. The contraction in oil has now turned to expansion with consumption up 4% y/y globally.
According to the latest reported information from the Energy Information Administration (EIA), EIA oil consumption is up 4% for 2010 from 2009. The data oil consumption data suggests the global economy has recovered from the financial crisis and is translated into higher oil demand.
Figure 1 Global Oil Demand
WE have seen economic contraction result into declines in oil demand before. Oil demand dropped in the 1979 to 1983 period with of a 10% decline per year. On a global basis, oil demand declined approximately 2% in 2009 from 2008, but is not up nearly 4% in 2010
In the US, oil demand dropped 5.7% in 2008 and 3.7% in 2009 with demand in 2010 increasing 3.8%. The oil consumption trend in the US suggests the decline in oil demand was cyclical as apposed to any structural changes in US consumer demand.
Figure 2 US China & India Oil Consumption
The real story is the growing demand for oil from China and India. According to data from The Centre for Global Energy Studies (CGES) , the demand for oil from China is up 100% from in the last ten years. China’s oil consumption rate has grown from 4.8 million barrels per day (MBPD) to 9.6 MBPD amounting to half of the total US consumption. In 2010 the growth in oil demand in China is up 17%.
The demand for oil in India is also increasing. Oil consumption in India is up 58% in the last ten years and up 8% in 2010.
Figure 3 China and India Oil Demand
The bottom line is that is demand for oil continues to increase and we expect further increase in oil prices.