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Paris: Traffic jams in Beijing and humming air conditioners in Dubai are replacing US highways and suburbs as the driver of global oil prices.
China, India, Russia and the Middle East for the first time will consume more crude oil than the US, burning 20.67 million barrels a day this year, an increase of 4.4 per cent, according to the International Energy Agency in Paris.
US demand will contract 2 per cent to 20.38 million barrels daily, the IEA says.
Economic growth of more than 8 per cent in China and India, coupled with increasing car ownership among the countries' combined populations of 2.45 billion people, will more than compensate for falling US demand. Oil use worldwide will increase 2 per cent this year because of growth in emerging markets, the Paris-based IEA says.
The rising oil price will benefit ExxonMobil Corp, BP Plc and Royal Dutch Shell Plc, while punishing a US airline industry that recorded four bankruptcies in a month. Higher energy costs will push up food costs at a time when corn and rice are close to new highs.
"The US recession will be a footnote as far as the oil market is concerned,'' says Jeffrey Rubin, chief economist at CIBC World Markets Inc. in Toronto, who has correctly forecast higher oil prices since 2000. "Supply isn't growing and demand is growing robustly in the developing world."
Oil will average $120 a barrel for all of 2008, compared with almost $98 in the first quarter of the year, and reach $150 "by the end of the decade," Rubin said.
Historically, a recession in the US would lead to lower prices. Oil fell 26 per cent to $19.84 a barrel in New York in 2001 when the economy contracted. The US consumes 24 per cent of the world's oil, down from 26 per cent seven years ago.
Two giants
Oil demand in both China and India will rise by 4.7 per cent, according to the IEA. China, the world's second-biggest energy user, will consume 7.89 million barrels of oil a day this year. India will use 2.92 million barrels of oil a day in 2008, more than is pumped by Opec member Venezuela.
Emerging markets burn a fraction of the energy of the US, leaving room for growth. The 2.45 billion people in China and India used only half as much crude as 301 million Americans last year.
Middle Eastern economic growth will probably accelerate to 6.1 per cent this year from 5.8 per cent in 2007, the IMF said April 9. Oil demand in the region will surge 5.8 per cent to 6.97 million barrels a day this year, according to the IEA.
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