Oil Price Dynamics
Global oil price dynamics is subject to many factors, the principal of which are the balance of supply and demand, macroeconomic and geopolitical situation, dynamics of the US dollar exchange rate, and conditions on the global financial markets.
The following graph represents the change in oil prices connected to major history events.
Graph 1: History of Oil Price
Source: BP Statistical Review of World Energy, June 2013
There is a number of trends that will support oil prices in the medium term and lead to growth in oil industry. Those are the following:
* Motorization in Asia
One of the principal factors of the future growth in demand for oil is the motorization of the population in the developing countries. According to the “Global Trends in Oil and Gas Markets to 2025 – Lukoil” report, the developing countries are currently severely behind the developed ones in terms of the number of cars per 1,000 people. The most noticeable increase in car ownership is forecasted for China. In today’s China the number of cars per 1,000 people is 40. By 2025 this figure will be close to 200, leading to 220 mln car fleet increase for the period of 2010-2025.
The report also mentions that a significant growth in car ownership is expected in India and other developing Asian countries. By 2025 large-scale growth of car ownership will begin in Africa.
Second graph shows that freight cars and trucks will make a strong contribution to the growth in consumption of motor fuels.
Graph 2: Motorization Curves/Car Fleet Growth
* Population growth and urbanization
Our planet’s population will continue to grow rapidly. Between 2010 and 2025 global population will grow by more than 1.1 bln people. As shown in the first figure of Graph 3, greatest population growth will be registered in the developing countries, while in the developed countries population will remain relatively stable.
High rates of population growth are expected,...