Ralative ability of India and China to deal with oil price hikes

Abstract

At the beginning of the 20th century oil supplied only 4% of the world’s energy. Today oil supplies about 40% of the world’s energy and 96% of its transportation energy. Since the shift from coal to oil, the world has consumed over 875 billion barrels. Another 1,000 billion barrels of proved and probable reserves remain to be recovered. If current trends hold, world oil consumption is projected to rise by about 50% from 2005 to 2020 1. Oil demand is forecasted to grow from around 80 million BPD in 2005 to 107 million BPD by 2020 and 121 million BPD by 2030 1. Transportation will be the fastest growing oil-consuming sector. By 2025, the number of cars will increase to well over 1.25 billion from approximately 700 million today. Global consumption of gasoline could double. The world's oil reserves have been declining for decades: production has exceeded discoveries of new reserves every year except one since 1980. Recently, Saudi Arabia's largest fields reached their peak production. In the past, Saudi Arabia has been able to increase production to stop sharp price increases that would disrupt the world economy, but it can no longer do this, and prices have already begun to rise and to become unstable. Today, 66% of global oil reserves are in the hands of Middle Eastern regimes: Saudi Arabia (25%), Iraq (11%), Iran (8%), UAE (9%), Kuwait (9%), and Libya (2%)1. To offset the growing influence of Middle East producers, non-OPEC countries in Africa and Former Soviet Union have increased their production considerably. But Russia’s prospects of being a key player in the oil market in the long run are dim. Russia ranksseventh in proven oil reserves, holding only 5%. Its oil production peaked around 1999 and its reserves have been steadily declining since. That means that at current production rates, Russia will be out of the running by 2020. Washington's search for reliable oil suppliers outside the Middle East has brought about an oil boom in many African countries like Angola, Nigeria, Guinea and Chad. But like Russia, Africa is hardly a bonanza. Its total reserves amount to 7% and its largestproducer, Nigeria, will peak by the end of the decade. Africa will be out of the running by 2025.