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The Continued Rise of China and India: Possible Implications for Global Oil Markets

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Title: The Continued Rise of China and India: Possible Implications for Global Oil Markets


1
The Continued Rise of China and India Possible
Implications for Global Oil Markets
Jeff Brown Oil Industry Markets
Division International Energy Agency
2
Why Do We Care?
3
Incremental GrowthDrives the Market
4
Chinese Oil Imports
5
Global Demand Growth 2004/2005/2006thousand
barrels per day
6
Oil Demand Compared
7
Oil Demand Growth Compared
8
Key Trends Rapid Growth in Trade-Related Oil
Demand
  • There is evidence that the movement of
    labour-intensive production overseas accelerated
    with emergence of China as a low-cost
    manufacturing base.
  • This move has had an impact on oil demand
  • Chinese demand for marine bunkers increased 50
    in 2004
  • Container traffic in key Chinese and US ports
    has boomed
  • US Trucking Tonnage Index increased 5.7 in 2004

9
Can China Continue on a High Growth Path? There
are Precedents
  • In many ways Chinas recent take-off mirrors the
    Korea and Chinese Taipei demand growth of
    1980-1997.
  • Although Chinas 2000 per capita income (adjusted
    for purchasing power) is similar to Korea and
    Chinese Taipei in 1980, it consumes much less oil
    per capita than they did at the time.

10
Korea Oil Demand Volatility
  • Koreas oil demand was very volatile during its
    high growth years
  • Yet from a global perspective the impact was
    relatively minor (except for 1998)

11
Chinese Taipei Oil Demand Volatility
  • The situation is somewhat similar for Chinese
    Taipei

12
Chinese Oil Demand Volatility
  • Chinas recent growth experience is quite similar
    to Korea and Chinese Taipei
  • However, due to its sheer size, Chinas impact on
    the global oil market is obviously much larger

13
Global Implications of China/India as Growth
Leaders?
  • Potential for a rapid rise in oil demand, as
    often discussed.
  • Likelihood of more volatile demand growth as
    Asian economies develop.
  • Depending on what happens on the supply side,
    increased price volatility.

14
State-run Companies Shifting Emphasis Overseas
Both are pursuing overseasIndia has often lost
out
15
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16
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17
  • Feb 2004 President Hu visited Egypt, Gabon and
    Algeria.
  • Investment agreements were signed with Egypt and
    Algeria and China started importing oil from
    Gabon.

18
Implications for Africa
  • Good?
  • Likely some benefits for oil exporters
  • Chinese and Indian companiespossibly
    overspending?
  • Recent agreement to limit competition
  • Appear to have a lower investment hurdle than
    international oil companies
  • More willing to go to risky/politically sensitive
    areas?
  • Bad?
  • Likely higher, more volatile prices with growing
    demand

19
Thank You
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