Poor Countries Are Not (That) Concerned With Oil Prices
|   Thursday, August 16, 2012
Reliable energy supplies are critical for economies throughout the world. Affordable energy can offer a way to a better quality of life, especially for developing countries. Economic stability is strongly influenced by the stability of energy supply and price. In most countries the average global oil price went up from approximately 25 dollars per barrel to more than 100 dollars per barrel, thus far outpacing rates of inflation. The increase has been due to oil speculation, the restriction of supplies by OPEC, growth in developing countries, peak oil, or other geopolitical factors.
However, the response to higher prices in developed and developing countries is a bit different.

Some suggest that as oil prices rise, developing countries would be priced out of the market, leaving wealthier countries to bid against each other for increasingly higher priced supplies. That's the theory anyway, as practice has shown us otherwise; over the past decade, things have evolved differently and in an educational fashion, and developed countries should heed the implications for the future.

A period that saw oil prices rise to record highs, from 2005 to 2010, oil consumption in the US fell by 1.6 million barrels per day (bpd).Oil consumption dropped by 1.2 million bpd in the European Union, and Japan registered a drop of 900.000 bpd.

The Asia Pacific saw a nearly 50 percent increase in consumption over the decade, and it was not even the fastest growing region. That ranking belongs to the Middle East, which added 56 percent to their oil consumption between 2000 and 2010. Total increase in consumption was smaller than that of Asia Pacific at just under 3 million bpd. Countries like Saudi Arabia saw the strongest demand growth in the region (which is not that surprising). That happened because the high price of oil brought a significant influx of cash into oil exporting countries, which in turn shown the tendency to increase their oil consumption as their wealth indicators soared.

In other developing regions, demand growth was strong too. For example, in Africa there was an increase in consumption to a little over 850.000 bpd, a 35 percent increase. South America increased by 1.2 million bpd, representing a 26 percent increase. That means that while prices were as high as ever, developed countries reduced oil consumption, while regions that were significantly undeveloped or developing increased oil consumption.

In turn, that means developing countries are willing to pay good money for oil which helps fuel their economical growth. So, don't be expecting the price of oil to drop significantly in the years to come; quite the contrary. Even if speculation was eliminated, the laws of economy say an increased demand will lead to higher and higher prices.

This should be a warning for "developed" governments worldwide: start finding alternative energy sources soon or a lot of bad things will happen. The world balance is shifting right now and many will be swept aside from their current positions if they cling to the old ways.
PHOTO GALLERY
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