Oil is one of the most important commodities of the 21st century. It’s the lifeblood of industrialised nations. It’s one of the most important sources of energy. It fuels the transportation of billions of people, every year. But then why is demand for oil around the world declining?
Take a look at the graphs below, all showing consumptions:
Source: Peak Oil Barrel
Demand for Oil
While more developed economies are decreasing their oil consumption, less developed nations continue to consume more oil each year. However, will less developed economies like China start to consume less oil as they become more developed?
Maybe. But demand for oil will likely continue, as China pulls more of their population out of poverty and into the middle income class.
However, highlighted in the Australian Financial Review this morning, China’s plans to phase out conventional gas guzzling vehicles could put a damper on their demand for oil.
‘To combat air pollution and close a competitive gap between its newer domestic automakers and their global rivals, China has set goals for electric and plug-in hybrid cars to make up at least a fifth of Chinese auto sales by 2025,’ the AFR writes.
‘Last month, state oil major China National Petroleum Corp (CNPC) said China’s energy demand would peak by 2040, later than the previous forecast of 2035, as transportation fuel consumption rises through the middle of the century.
‘Song Qiuling, a senior finance ministry official, said that government subsidies, intended for jump-starting the new energy auto industry, could easily be abused if held long-term and led to “mindless expansion” and excess capacity in the sector, Xinhua reported.
‘She said China would gradually withdraw such financial subsidies for the sector, and instead speed up the establishment of a credits accumulation policy to support the industry.’
Junior Analyst, Markets & Money
PS: Oil probably isn’t the safest commodities to bet on. Not only is supply dictated by oil producing nations, the level of consumption across the developed world is falling. Why not put your money in commodities which are booming?
Resource Analyst, Jason Stevenson names the top ten resource stocks profiting from booming commodities in his Markets and Money report ‘The Top 10 Mining Stocks in Australia For 2017’.
Check out Jason’s free report and find what resource stocks could race up in 2017.