Developing Economies Drive Global Oil Demand

Ehsan Soltani

The global oil import landscape has undergone a significant shift over the past three decades, with developing economies now playing an increasingly important role in oil demand and trade.

Global oil imports increased from 31.8 million barrels per day (bpd) in 1990 to 68.8 million bpd in 2022. Developed economies experienced a modest 29% rise in oil imports during this period, while developing economies recorded a staggering 435% increase. As a result, the share of world oil imports held by developed economies declined from 78% in 1990 to 47% in 2022.

As the largest player in the world oil market, the United States experienced a cyclical pattern in oil imports from 1990 to 2022. Imports started at 8 million bpd in 1990, reached a peak of 13.6 million bpd during 2005-2007, and then returned to approximately 8 million bpd by 2022.

 In contrast, Europe's oil imports increased from 9.8 million bpd in 1990 to stabilize at an average of 13.5 million bpd from the mid-2000s through 2022. Japan's imports, on the other hand, gradually declined from a peak of 5.7 million bpd in 1996-1997 to 3.5 million bpd in 2022.

China's oil imports witnessed a remarkable surge, skyrocketing from 130 thousand bpd in 1990 to 12.2 million bpd in 2022, corresponding to 17.7% of global oil imports. Concurrently, India's oil imports showed a steady and substantial growth, rising from 600 thousand bpd to 5.8 million bpd during the same period. China and India accounted for respectively 32% and 14% shares of world oil imports addition from 1990 to 2022.

There are several factors that have contributed to the aforementioned shift in oil imports with developing economies now playing a more prominent role.

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1. Economic growth:

Despite developed economies comprising approximately 60% of the world economy (GDP in US$), developing economies have contributed to over 60% of global economic growth over the past three decades.

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2. Population growth:

Around 83% of the global population resides in developing economies, which have accounted for approximately 95% of the world's population addition over the past three decades. In contrast, Europe and Japan have experienced near-zero population growth, while North America and Australia have exhibited more favorable demographics.

Developed economies, alongside declining population growth, have witnessed a reduction in per capita energy consumption. Conversely, developing economies have shown robust population and per capita energy consumption growth, which has driven increased energy demand.

3. Industrialization:

In developed economies, service sector-driven growth with lower energy consumption is contrasting with developing economies heavily reliant on energy-intensive manufacturing and heavy industries. In 2021, developing economies surpassed developed economies in manufacturing value added, notably led by China exceeding the United States and Euro Zone combined.

4. China's influence:

China has played a significant role in the global economic and energy market, contributing to 28% of global economic growth and accounting for about half of the world's increased energy consumption from 1990 to 2022.

5. Transportation Demand:

Approximately two-thirds of global oil consumption is used for transportation, with roughly half devoted to road transportation. Developing economies have witnessed a surge in private vehicle ownership and increased demand for transportation services, resulting in higher gasoline and diesel fuel consumption. Between 2001 and 2022, passenger car production in developing economies skyrocketed by over 400%, while it declined by approximately 20% in developed economies.

6. Oil consumption:

From 1973 to 2022, oil consumption in developed economies remained relatively stable, hovering around 47 million bpd. Conversely, developing economies witnessed a staggering 500% increase in oil consumption, rising from 8.5 million bpd to 51.6 million bpd.

7. Oil production growth in the U.S. and Canada:

Oil and petroleum production in developing economies declined by 3% between 2008 and 2022, while developed economies experienced a robust 50% increase.

The United States and Canada spearheaded this growth, more than doubling their crude oil production over this period. The United States, driven by the shale revolution, was a major contributor, accounting for roughly two-thirds of the expansion in developed economies' crude oil production.

8. Energy trade deficit:
The combined crude oil trade deficit of the European Union, the United States, Japan, and South Korea reached 1 trillion US dollars in 2012. This was more than four times compared to the early 2010s, and equal to 2.6% of their respective GDPs. High oil prices have prompted developed economies to reduce their reliance on imported oil.

9. Energy transition:

Share of renewable in total energy consumption raised in developed economies from 7.5% in the mid-2000s to 13.3% on 2021 of. Some developing economies including China, India, Turkey and Vietnam gain from renewable energy. These countries more than doubled the share of renewable sector from total energy consumption in the same period, meanwhile total other developing not changed.

10. Energy efficiency:
Developed economies have made significant improvements in energy efficiency. In contrast, many developing economies are still struggling to keep up, leading to pressure on energy demand, mainly for oil in the transportation sector. Energy intensity in developed economies decreased by 45% from 1995 to 2021, while in developing economies, it decreased by 8%.

11. Energy security:

Energy security for oil is a critical concern in developed economies. These economies seek to take actions such as diversifying energy sources, investing in energy efficiency, and promoting alternative transportation to reduce their dependence on imported oil.

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12. Environmental Considerations:

Environmental concerns have led to a decrease in oil consumption in developed economies. Developing economies are less concerned about these issues due to factors such as a lack of financial resources and required technologies and environmental regulations.

The United States, Canada, Norway, and Australia will consume their productions of oil and natural gas, while also increasingly relying on non-fossil energy sources. Europe will continue to invest in new energy sources. In contrast, developing economies are expected to consume more energy and oil in the future due to ongoing economic and industrial development. Therefore, the trend of shifting oil imports from developed to developing economies will persist, with significant implications for global carbon emissions.