Economic Growth and Black Gold go Hand-in-Hand Consequently Influencing the Crude Oil Market Growth
World economy has been dependent on fossil fuels since past several decades and continues to rely partially on them as an alternative source of energy. Fossil fuels such as crude oil, also known as black gold, took the centre stage for various industrial applications and its demand has often sparked political unrest as very few countries control largest crude oil reservoirs. Economic growth is the biggest aspect influencing the petroleum industry and with that the demand for crude oil. Demand from growing economies for energy in general and particularly for transportation of goods from manufacturers to customers has been on the rise. Several countries in the globe heavily rely on petroleum products for various purposes such as cooking, heating and even electricity generation. Petroleum products derived from crude oil account for one-third of the total energy consumption on the global front, according to EIA (U.S. Energy Information Administration). The transportation sector worldwide is almost completely dependent on petroleum products, which has influenced the growth of the crude oil market to a significant extent.
COVID 19’s Impact in 2020 Significantly Slowed Crude Oil Market Growth; However, 2021 Reflected a New Dawn
Since the outburst of the COVID-19 pandemic in 2020, the demand for crude oil was heavily impacted. Prices of crude oil fell significantly across all grades from various regions such as West Africa, North Sea and the Middle East. The COVID-19 impact also weighed heavy on oil products, particularly jet and kerosene. According to Organization for Economic Co-operation and Development (OECD), fragile oil-exporting countries were hit hard by the negative impact of the pandemic in 2020. An already volatile market, given the pandemic outburst, has touched a flashpoint in turn accentuating drawbacks of high reliability on non-renewable energy sources. Albeit a moderate recovery in prices coupled with rapidly declining costs of renewable sources of energy, the oil sector faced a structural decline in the year.
However, in 2021, the global demand for crude oil started to witness recovery on the back of a significant acceleration in economic activity coupled with recovery from the COVID impact. According to World Bank, prices of crude oil witnessed speedy recovery in 2021 after the pandemic slump. This was mainly due to firm demand and increased production by Organization of the Petroleum Exporting Countries (OPEC) and its partners or OPEC+. With the demand returning to its pre-pandemic level, OPEC+ has increased production with crude oil prices touching US$ 56/bbl in 2021. The demand for crude oil continues to increase steadily after its consumption plunging 9% in 2020. According to World Bank, diesel and gasoline have almost returned to their pre-pandemic level, however jet fuel demand growth remains comparatively slow due to slow recovery in air travel.
Soaring Crude Oil Prices to Impact Global Market
Since its recovery from the pandemic impact, 2021 presented an opportunistic scenario for crude oil market. However, the ongoing Russia and Ukraine war, exerted immense pressure on crude oil prices and hence consumers worldwide. Moreover, United States is in discussions regarding a political ban apropos to purchasing Russian energy. Meanwhile, more than 70% crude oil exporters in Russia are without buyers and traders are facing challenges to sell oil from Russian sources owing to difficulties in payments and shipping amid the Ukraine invasion.
In addition, immediate rise in crude oil prices was also sparked due to renewed tensions in Middle East after an attack from drones on Abu Dhabi’s three oil tankers killing three individuals. As retaliation, Saudi Arabia launched air strikes in Yemen, in turn triggering a new spate of violence which resulted in soaring prices of crude oil. Such geopolitical tensions continue to ignite concerns regarding higher inflation in domestic and international markets, consequently impacting the crude oil market.
Gasoline to Account for a Significant Share in the Crude Oil Market
Demand for gasoline continues to witness a significant increase on the back of growing requirements from the transportation sector. Momentous growth in the use of passenger vehicles such as scooters and cars has fuelled the gasoline demand. For instance, according to IEA (International Energy Agency), in 2021, gasoline demand in China witnessed a significant rise of 11% to 13% touching 3.8 to 4.1million bpd. Likewise, according to EIA, consumption of gasoline in 2020 in the United States averaged 8.03 million bpd accounting for 44% of the overall consumption of petroleum in the US. Being the most consumed product, rising gasoline sales are expected to largely contribute to the growth of the crude oil market in the following years.
North America to Largely Contribute to the Crude Oil Market Growth
Developed economies in North America are expected to showcase high growth potential apropos to use of various crude oil products. According to EIA, United States is one of the top producers of crude oil since 2018 and has maintained the status quo. In 2020, crude oil production in US represented a share of 15% followed by Russia (13%), Saudi Arabia (12%), Iraq (6%) and Canada (5%), accounting for a 50% of the global crude oil production in the year. Moreover, in 2021, around 134.83 billion gallons of gasoline were consumed in United States and is expected to further increase at a steady rate. That said, an optimistic scenario lies in North America and is likely to re-shape the scenario of the crude oil market.
Crude Oil Market: Competitive Landscape
Few of the players in the crude oil market include Saudi Aramco, PetroChina, Exxon Mobil Corp., Chevron Corp., BP Plc, Marathon Petroleum and Phillips 66.
Regional Classification of the Global Crude Oil Market is Listed Below:
Middle East and Africa
*Regions and countries are subject to change based on data availability.
Key Elements Included In The Study: Global Crude Oil Market
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