The most recent monthly report issued by the Organization for Economic Co-operation and Development (OECD) indicated that demand on oil in the OECD countries has peaked. This important trend was attributed to the contraction of oil consumption for heating, power generation and industrial processes. The main reason behind this contraction is the growth and expansion of spot markets for natural gas. For example, the report mentions that the use of petroleum in generating electricity in the countries of the OECD (the industrialized countries) has shrunk by about 40 percent in the year 2000. Despite the possible increase of petroleum consumption in the transportation sector, the report adds that producing high efficiency cars in terms of fuel economy and hybrid cars, which use solar or electric power, or biofuels- in addition to fossil fuels-will gradually reduce demand on gasoline and diesel. The report concludes that the increase in demand on fossil fuels has peaked in the OECD countries, which will leave a negative mark on the refining sector in the industrialized countries. Meanwhile, the International Energy Agency (IEA) forecasts that demand on oil will increase this year, with most of this increase coming from emerging countries, rather than the industrialized ones. The agency came up with this assessment based on forecasts of the growth of overall [global] GDP issued by the International Monetary Fund last January. The data mentioned in the IEA's report shows that global demand for oil has recorded the following levels: reaching 86.2 million bpd in 2008, demand has shrunk to 84.9 million bpd in 2009, following the onset of the global economic crisis. In 2010, demand is forecasted to grow to 86.5 million bpd. In terms of demand in the Middle East, it is continuously on the rise, reaching the level of 7.1 million bpd in 2008, 7.2 million bpd in 2009, with expectations for it to reach 7.6 million bpd this year. There was also and increase in demand for oil in Asian countries in the same period, registering 25.6 million bpd in 2008, 26.1 million bpd in 2009 and 26.7 million bpd in 2010. The IEA report also forecasts that demand for oil in non-OECD countries will reach the level of about 41 million bpd in 2010, or 4.5 million bpd less than the demand in OECD countries. What do these figures mean? Primarily, they mean that talk about a peak in oil supplies is not accurate; rather, it is just a scare tactic used against the public opinion in industrialized countries, whenever a hike in oil prices takes place, to claim that the Middle Eastern oil producing countries will not be able to satisfy the world future demand for oil. But in truth, should the forecasts of the IEA prove to be precise, oil countries must beware of shrinking oil demand in the industrialized countries. These forecasts also confirm what was mentioned before, namely, that the increased demand for oil is coming from emerging countries, including the countries of the Middle East themselves, or that in other words, oil consumption is on the rise in the oil exporting countries themselves. This means that there is a significant change in terms of the importance of the markets that receive oil exports and that the oil producing countries must therefore take into account the shifts taking place in these markets and their sizes. What ensues is that these countries should modify their priorities and investments in light of these variables – which is what indeed has been taking place for some time now. It is quite likely that the significance of the IEA forecasts will be amplified by the increasing attention paid by the industrialized countries to climate issues, as well as environmental conservation and pollution control. In fact, the new programs in this vein may adversely affect demand for oil. But then, what are the overall impacts of environmental plans and how quickly will these affect demand for oil? Finally, how will the oil producing countries adjust their budgets, expenditures and investments, in light of this great environmentalist momentum and what it entails in terms of reducing global demand for oil?
