Oil-Price Volatility Bedevils Business and Consumers
“The surest remedy for high prices may ultimately prove to be high prices themselves,” the IEA notes.
Emerging Market Demand
Demand from the emerging markets and developing nations, however, shows no signs of slowing — the reason global demand for oil is projected to remain flat or slightly higher for the foreseeable future.
Historically, the 34-developed countries that comprise the Organization for Economic Cooperation and Development, OECD, which include the U.S., and Europe, have accounted for the largest share of world energy consumption.
But in 2007, energy use among non-OECD nations exceeded that of OECD nations for the first time, according to the EIA.
By 2035, the agency projects China and India, both non-OECD countries, will account for 30 percent of total world energy consumption, and energy use throughout non-OECD Asia will rise 118 percent between 2007 and 2035.
Energy use is also expected to rise 82 percent in the Middle East during the same period, and 63 percent in Central and South America and Africa.
By comparison, the U.S. share of world energy consumption is projected to fall from 21 percent in 2007 to about 16 percent in 2035, the EIA reports.
According to Lafakis, much of the decline in U.S. demand for crude oil stems from a shift in consumer behavior.
“As prices rise, consumers are more sensitive,” he says. “People are moving closer to their jobs, walking to work or using more public transportation.”
They are also buying more energy-efficient cars.
“Over the last two or three years, when the price of gas hit $4 per gallon, consumers were buying fewer trucks and sport utility vehicles (with lower gas mileage) and more cars,” he says, noting the same purchasing pattern emerged during the most recent spike in prices at the pump. “Most of the oil used in this country is used for transportation purposes. If oil prices continue to rise, then I would expect to see the same response from consumers.”
As such, he notes, the biggest impact of the recent spike in oil prices may not be the toll it took on the world economy, but a permanent change in how the U.S. and other industrialized nations manage their dependence on oil.