"Supply availability has continued, but at the cost of high prices," said BP chief economist Peter Davies speaking today at the launch of the BP Statistical Review of World Energy 2006. "Market adjustments are beginning and will continue. There has been a price effect already with coal and gas prices falling and oil consumption growth slowing sharply and inventories rising."
Published annually by BP, the review contains detailed data on worldwide energy production and consumption with this latest edition including data up to the end of 2005.
World energy growth slowed in 2005 with an increase of 2.7 percent, down from the 4.4 percent increase in 2004 which was the largest rise for 20 years.
Energy consumption in the United States fell by 0.1 percent last year, the first time since 1985 that the U.S. experienced a combination of higher-than-normal economic growth and a decline in energy consumption. This was largely due to the effect of both high prices and relative energy prices in competitive markets as well as the impact of hurricanes in the Gulf of Mexico--the decline in U.S. oil consumption was concentrated in the last four months of the year, after the hurricanes.
China also experienced a reduction in energy consumption growth, from 15.5 percent in 2004 to 9.5 percent in 2005, although economic growth in China was essentially unchanged at 9.9 percent. China is now the world’s largest producer and consumer of coal, having resolved the shortage of coal for power generation of the previous year. It is also the largest producer of hydroelectricity.
Below are summaries of BP's major findings in terms of the oil and gas sectors.
OilIn terms of consumption and production growth, 2005 was a weaker year in the oil markets. However this failed to remove excess supply and inventories continued on an upward trend, firmly above historic average levels in aggregate. Prices rose further with Brent crude averaging $54 a barrel for 2005 as a whole--a development considered to be due less to "fundamentals" than to the perception of risk, exacerbated by limited spare capacity.
Growth in oil consumption fell by 1.8 million barrels a day--to 1 million barrels a day--principally due to slowdowns in the U.S. and China but also as a result of weakness in developing Asia Pacific--where price subsidies were reduced in Indonesia, Malaysia, Thailand, and the Philippines--and because India substituted imported oil with imported gas and coal.
Oil production growth in 2005 was 889,000 barrels a day, equivalent to 1 percent, with OPEC supplying almost all of the growth. This was lower than expected for a number of reasons--many OPEC producers had reached or were close to full capacity, security problems in Iraq, hurricanes in the U.S., declines in both the U.K. and Norwegian North Sea, a slowdown in Russian production, a number of accidents and disruptions to production, and rising cost inflation which reflected constraints in the contracting and engineering sectors, leading to delays.
Gas World gas consumption growth also fell back in 2005, although the fall--2.3 percent--was less than that of oil. Slower global economic growth was one factor, but there was also an impact from the U.S. hurricanes, which were more disruptive to US gas markets than oil markets. Internationalization of gas continued via pipelines and LNG, domestic supply availability increased in some specific markets, and industrial gas consumption in particular proved to be price-sensitive in liberalized energy markets.
Gas prices have been pulled upward by rising oil prices, and there were spikes in the U.S. and the U.K. in response to changing demand conditions.
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