CEH Report

Table of Contents

Abstract

Crude petroleum is the largest single source of energy in the world, accounting for approximately 35–40% in oil equivalents of energy consumed in the world, and is the basic building block for a large number of chemical products consumed globally. This marketing research report presents an overview of the markets for crude petroleum and its derivatives.

The following pie chart shows demand for crude petroleum by major region:

As of early 2010, global crude petroleum demand was in a slow recovery after the first decline in growth since the early 1980s. Oil demand growth in the United States, Western Europe and Japan will be slow as domestic economies slowly improve. In regions such as Africa, South and Central America, the Middle East and Eastern Europe where domestic demand is slowly on the rise, growth will be more robust as markets give way to exports. Asia Pacific continues to experience the greatest demand growth, with steady economic growth and a focus on domestic development. World oil demand is forecast to increase 1–2% through 2011 before rising at a rate above 2% for 2012–2014.

As of January 1, 2010, the estimated world proved reserves of crude petroleum were 1,354 billion barrels. OPEC currently accounts for approximately 71% of total world oil reserves. Saudi Arabia holds the single largest share of the world's petroleum reserves at 19% of the total. On a regional basis, the Middle East accounts for nearly 56% of the world's reserves; North America is second with 15%, and Central and South America is third with 9%, following recent reserves identified in Brazil and Venezuela.

The following pie chart shows world reserves of crude petroleum:

The major regions of growth in crude oil production in the next few years will be Russia, the Caspian Basin, non-OPEC Africa, and Central and South America. U.S. and Western European imports are expected to increase as a result of growing demand and decreased domestic production, while regions in Asia, primarily China and India, will continue to experience steady import growth. The development of nonconventional oil production, mainly from oil sands in Canada, will continue to grow over the next ten years.

Crude petroleum is one of the world's most widely traded commodities impacted by social, political and economic factors. World petroleum markets have undergone a series of dramatic changes since the early 1970s. Some of the more recent events include the following:

• In 2006, militants attacked pipelines and halted nearly one-fifth of Nigeria's oil production, causing an estimated 6% spike in global oil prices early in the year. Approximately one-half of Nigeria's total crude oil exports arrive in the United States.
• By midyear 2006 in the United States, the elimination of MTBE as a gasoline oxygenate resulted in higher-than-expected demand for ethanol. Gasoline producers struggled through the summer months as high seasonal demand strained ethanol and gasoline supplies. Crude oil prices increased above $60 per barrel.
• Rising global demand through 2007, combined with concerns about global shortages despite increases in output by OPEC members, led to further price increases. By April 2008 crude oil prices had risen above $100 per barrel and reached an all-time high of $145 per barrel in July 2008.
• Record oil prices and instability in the banking sector sparked a global economic recession, resulting in oil demand declines in the third quarter of 2008. Prices plummeted to a low of $35 per barrel by the first week of 2009.

As of January 1, 2010, the United States had a reserves-to-production (r/p) ratio of approximately ten years, while Russia had an r/p ratio of seventeen years. In contrast, OPEC nations had an r/p ratio of about 92 years, while oil producing nations of the Middle East averaged about 100 years. With the world's total oil reserves at 1.4 trillion barrels, approximately 53 years of output could be achieved at the 2009 production rate.