Crude, by any other name

by Barry Sergeant

Why all the fuss about sky-high crude oil prices? According to the 2005 BP Statistical Review of World Energy, now in its 54th year, crude oil, after all, contributes just 37 % of the world’s primary energy needs.
In reality, crude oil’s contribution is lower than 37 %, given that BP’s analysis excludes fuels such as wood, peat and animal waste, which remain important in many countries. In one of its handy tables, BP conveniently reduces the five primary sources of easily measurable energy -- crude oil, natural gas, coal, nuclear and hydro -- to “million tons of crude oil equivalent” (mm toe).

In 2004, according to BP, the world used 10,224-mm toe; crude oil contributed 37 % of the total, natural gas 24 %, coal 27 %, nuclear energy 6 %, and hydro electricity 6 %.
The aim of the review, according to BP CEO John Brown (Lord Browne of Madingley), is to record year-by-year, the production and consumption of all the main forms of energy on a global basis. BP does not seekor attempt to measure the economic consequences of higher or lower prices for energy, though, by now, the global economy is unquestionably starting to sweat inflation stuff over high crude oil prices.

What was surprising about 2004, perhaps, was that global primary energy consumption increased by 4.3 %. The strongest rise (no surprise) was in Asia-Pacific, where consumption was up by 8.9 %, while North America recorded the weakest growth at 1.6 %.
Despite crude oil’s grabbing of headlines during 2004, coal remained the fastest growing fuel, rising 6.3 % globally. Hydroelectric and nuclear generation also experienced strong growth, rising 5 % and 4.4 %, respectively. Crude oil consumption, by contrast, grew by 3.4 %; that, however, was the most rapid rate since 1986. Only natural gas grew at a slower rate than crude oil, at 3.3 %.

Browne notes that 2004 was the second consecutive year of high growth in global energy markets: “A buoyant world economy contributed to the strongest growth rate in global primary energy consumption since 1984.” Despite the relatively low rate of growth in use of primary energy products in North America, the US remained kingpin, chomping up 23 % of the world’s primary energy supplies, at 2,332-mm toe.
The big new kid on the block, and now No 2 in the world, but a long way behind the US is, of course, China, at 14 % of the global total with 1,386-mm toe used up in 2004. China is followed, again, a long way behind, by the Russian Federation with 669-mm toe, Japan with 515-mm toe, and India with 375-mm toe. South Africa, for comparison, chimes in at 124-mm toe, some 1.2 % of the global total.

Crude oil prices most recently peaked in 2000, when one of the benchmarks, West Texas Intermediate, averaged $ 30.37 a barrel for the year. In 2004, another benchmark, Brent (which averaged $ 28.50 in 2000) averaged $ 38.27 a barrel, almost $ 10 a barrel higher than the 2003 average.
This year, another benchmark, sweet, light crude oil, as quoted on the New York Mercantile Exchange, has traded close to $ 70 a barrel in recent weeks. According to BP, with global economic growth at a 15-year high in 2004, demand for crude oil grew by 2.5-mm bpd, averaging 80.8-mm bpd for the year.

The surge in demand reduced the level of global spare crude oil pumping capacity from around 3-mm bpd in 2003 to as little as 1-mm by mid-2004. High oil prices stimulated substitution, as seen in the higher growth rates for consumption of natural gas and coal.
In the 10 years to 2004, Asia-Pacific (including China and India) has increased consumption of crude oil products from 17-mm to 23.5-mm bpd. Over the same period, the figures for China more than doubled from 3.2-mm to 6.7-mm, while the US shifted more gradually from 17.7-mm to 20.5-mm. The figure for Europe was much unchanged, while Japan’s consumption slipped 3 % from 5.8-mm to 5.3-mm a day.

China remains the star of the world energy show. While global coal consumption rose by 6.3 % in 2004, China accounted for 75 % of the increase. Andwhile global hydroelectric generation rose by 5 % in 2004 after stagnating in 2003, growth was particularly strong in China, up 17 %, as new capacity came on line.
Outside the US, natural gas consumption rose by 4 %, with the largest gains in Russia, China and the Middle East.