The main countries and sectors of the economy are oil consumers

Oil produced in the Middle East is mainly exported to the United States, Asia and Europe. The main importer (and at the same time consumer) of oil is the United States (see Diagram 5 and 6). They are followed by Asian countries- rapidly developing China and India, as well as the powerful economies of oil-poor Japan and South Korea. In the second half, dozens of the largest importing countries were located European countries. Thus, the above countries account for about 70% of global crude oil imports.

According to OPEC and BP forecasts, oil consumption in China may increase by 8-8.5 million barrels per day by 2030, and the country will overtake the United States, becoming the world's largest consumer of this raw material. The increase in demand will mainly come from transport and industry (mainly the petrochemical industry).

In general, in the global economy, the increase in oil consumption will not proceed at such a rapid pace as in China. In OECD (Organization for Economic Co-operation and Development) countries, the structure of energy demand will shift towards gas and renewable energy sources (including biofuels), and the share of oil will decline in all sectors of the economy.

Chart 5. Ten largest oil consuming countries (million barrels per day)

Diagram 6. Largest oil importing countries in 2010

Possibility of quickly replacing oil with alternatives in major consumer sectors

The replacement of hydrocarbons with alternative energy sources is a necessity due to the policy of reducing harmful emissions, the exhaustibility of natural resources and the issue of diversifying the energy base of states. The commitments of the governments of the world's leading countries, adopted at the UN Conference held in December 2009 in Copenhagen, and the G20 meeting in September 2009 in Pittsburgh, are aimed at reducing emissions by at least 50% by 2050, limiting the increase in global temperatures up to two degrees above pre-industrial levels (the so-called 450 Scenario) and the elimination of subsidies for the extraction and use of fossil energy sources. However, according to BP forecasts, OECD countries will be able to reduce their own carbon emissions by only 10% by 2030 compared to current levels. Despite all the measures taken by the governments of non-OECD countries, the strong growth in energy consumption (especially coal) by their economies will lead to an increase in emissions in these countries by one and a half times by 2030. In general, positive trends to limit the influence of the world energy complex on the global climate are present, but they are clearly insufficient for the implementation of Scenario 450.

Tightening policies aimed at reducing the carbon intensity of the economy is also associated with the need to diversify the fuel balance of countries. According to BP forecasts, the shares of the three main fossil energy sources (coal, oil and gas) will converge and by 2030 will amount to 26-27%, and non-fossil sources (nuclear power plants, hydroelectric power plants and renewables, including biofuels) will occupy about 7% each. Thus, gas and renewable energy resources will gradually displace oil (as well as coal) from the electricity industry, and biofuels, hydrogen and electricity will find their use as driving force for transport. However, oil will definitely not lose its relevance in such a sector of the economy as petrochemistry, being, in fact, the only source of raw materials for it.

We should not forget the fact that sudden fundamental changes in the global fuel balance are hardly possible. And it’s not so much about the new ecological paradigm, the problems of non-renewability of fossil natural resources or the uniqueness of physical and chemical properties of one type of fuel or another, how much is involved in the high capital intensity and considerable time costs of all investment projects related to the development of energy (including oil) industries. And here the assessment of the economic efficiency (payback) of projects, the cost of future production and, as a consequence, the issue of pricing, as the cornerstone in the relationship between suppliers and consumers of energy resources, comes to the fore. As we can see below, oil prices have long been no longer guided by classical market relations and move according to their own laws.

Against the backdrop of numerous favorable forecasts for the growth of global oil consumption, Brent oil prices are now more stable than at any time in the last five years: they have never fallen below $61 per barrel since the beginning of November 2017, and in January for the first time since 2014 year exceeded 65 dollars and even - at the moment - exceeded 70.

Average daily volatility of 1.2-1.3% is quite normal for the oil market and does not frighten investors, which is reflected in the growth of stock prices of energy companies. For example, with the closure of the European pipeline for repairs and the corresponding rise in Brent prices by 3.3%, the shares of all the largest commodity companies in the world, already growing, showed almost a record increase for 2017 (BP + 2.2% , Total +1.4%, Royal Dutch Sell +1.7%). An additional impetus to the rise in oil prices was given by the news that OPEC countries agreed to extend restrictions on oil supplies until the end of 2018. In other words, oil is subject to two key conditions at once: the promised growth in consumption in the future and the absence of a current oversupply of oil on the market in the present. However, is everything so good and is it worth talking now about the return of a pronounced speculative component in oil pricing?

Let's remember: the triumphant ascent of oil began with OPEC forecasts about the growth of world oil consumption in 2018 (360 thousand barrels per day more than now). At the same time, the “sand” initiative of American shale oil producers performed well (it consisted of extracting oil directly in the desert and transporting already prepared raw materials to oil refineries), who stated that in the near future they could produce about 11.8 million barrels per day. For comparison: Russia produces a little more than 10 million barrels.

A real breakthrough was the comments of large oil companies on OPEC's long-term forecasts for the growth of oil consumption in 2040: the cartel believes that daily consumption could reach 107 million barrels per day, while this forecast is considered conservative by cartel analysts. At the same time, in mid-November, the International Energy Agency (IEA) published a report in which it increased its forecast for oil consumption in 2040 to 104.9 million barrels per day, which is 1.4 million more than the previous forecast. Currently, the weighted average consumption of oil in the world is approximately 96 million barrels per day.

At the same time, the forecasts of representatives of the oil business began to come true, who unanimously noted back in the summer that the development of electric cars was not a hindrance to oil prices. Indeed, in November, Tesla Motors reported record losses, explaining them by too large investments in the development of its own processor for artificial intelligence. In fact, the growth in sales of Tesla cars, predicted for the fall-winter, did not happen, and 1,000 orders for the first electric truck, which became main pride company in December, her financial condition won't help. Data for the full year is not yet available, but investors are already preparing for the worst.

Investments in renewable energy sources for last year increased by almost 30%, however, such projects (primarily solar power plants and wind generators) are mainly implemented in developing countries. The leader in the production of alternative energy today is Chile, which produces perhaps the cheapest solar energy in the world. However, this has almost no effect on oil consumption in South America - the main oil consumer on the continent is Brazil, which consumes more oil than all other countries Latin America, taken together. What can we say about limiting the consumption of petroleum products in the world against the background developing projects"green energy"?

Over the past ten years, oil consumption has increased on virtually all continents except Europe (say South America, according to BP, over the past ten years, oil consumption has increased by 75 million tons, and China - by almost 100 million). Production is growing, and so is the consumption of petroleum products, although virtually all authors of long-term forecasts indicate that oil consumption lags significantly behind expectations, just as global economic growth lags behind expectations.

However, each oil producer sees the peak of consumption differently. OPEC believes that consumption will peak in 2040, after which it will begin to decline. Royal Dutch Shell PLC and Norway's Statoil SA predict that peak consumption will occur in 2025 and 2030, respectively. Exxon Mobil Corp. and Chevron Corp. even believe that peak oil consumption will occur no earlier than in 100 years.

All these forecasts have an equal right to exist. Back in 2011, Vagit Alekperov said that oil, in principle, could not cost less than 100 dollars, but soon it dropped to 30. Until recently, analysts around the world said that the limit on oil prices was 50 dollars per barrel, but today oil prices are stable more than 60 dollars.

The fact remains: the oil market is the largest sector of the real economy in terms of the volume of funds involved in it. More recently, on December 6, 2017, oil prices fell by 2.5% thanks to a large number long positions on the market and the general tendency to close them, although other factors (decrease in crude oil reserves in US oil storage facilities, negotiations to extend the restriction of oil supplies, etc.) should have contributed to their growth. By and large, there is nothing extraordinary in this, if not for one nuance: the tendency to take profits on long positions in the market significantly affected the quotes of oil contracts for the first time since 2012. Most likely, this phenomenon will be repeated.

Our article is for those who want figure out, how the price of oil and then gasoline develops. Do you understand why oil prices change from day to day? Who decides how much oil will cost, as well as who the main players in the crude oil market are. If you are interested in the answers to these questions, and also if you want to understand the global oil market a little more, read our article.

In order to understand to whom belongs to oil Who is a seller and Who For the buyer who needs oil most, carefully study the maps and tables below.

Countries with the largest oil reserves

The richest countries in terms of oil reserves are:

Country	Oil reserves, tons
Saudi Arabia	262,600,000,000
Venezuela	211,200,000,000
Canada	175,200,000,000
Iran	137,000,000,000
Iraq	115,000,000,000
Kuwait	104,000,000,000
	97,800,000,000
Russia	60,000,000,000

The USA is in 13th place (20,680,000,000).

You can clearly see on the map below which countries are the richest in terms of oil reserves and how many tons they produce. When you hover over a country, a number will appear.

Oil producing countries

Country	How much oil is produced, barrel
Saudi Arabia	10,520,000
Russia	10,270,000
USA	9,688,000
Iran	4,252,000
China	4,073,000
Canada	3,483,000
Mexico	2,983,000
United Arab Emirates	2,813,000
Iraq	2,642,000
Nigeria	2,458,000

Oil consuming countries

Country	Consumes, barrels
USA	19,150,000
China	9,400,000
Japan	4,452,000
India	3,182,000
Saudi Arabia	2,643,000
Germany	2,495,000
Canada	2,209,000
Russia	2,199,000
South Korea	2,195,000
Mexico	2,073,000

Oil exporting countries (oil sellers)

Country	Exports, barrels per day
Saudi Arabia	7,635,000
Russia	5,010,000
Iran	2,523,000
United Arab Emirates	2,395,000
Norway	2,184,000
Iraq	2,170,000
Kuwait	2,127,000
Nigeria	2,102,000
Canada	1,929,000
USA	1,920,000

Oil importing countries (oil buyers)

Countries	Imports, barrels per day
USA	10,270,000
China	5,080,000
Japan	4,394,000
India	3,060,000
Germany	2,671,000
Netherlands	2,577,000
South Korea	2,500,000
France	2,220,000
Singapore	2,052,000
Italy	1,800,000

Leading oil refining companies

Below are companies that are leaders in terms of crude oil refining volume, and, consequently, in terms of revenue.

From the tables and lists above, the following picture emerges.

• Optional the leading country in oil reserves is the leading country in oil consumption and production.
• USA, being leader on oil consumption, is not leader in oil production and reserves.
• Not necessarily the country producing most oil earns the most. An example of this again USA, receiving the largest income in the world from oil refining, although they are in 13th place in raw material production.

Stages that crude oil goes through

This happens because oil does not only need to be extracted. Let's look at what stages crude oil goes through before you can make money on it.

• Delivery
• Processing (waste is included in petrochemicals)
• Delivery of petroleum products to consumption areas (as a rule, geographically, consumption zones and production and processing zones are located in completely different places)
• Sell ​​small wholesale and retail

Thus, it turns out that from the extraction process to the sales process there are many stages. And the most important thing - at the very end - is to sell the oil correctly.

There are several brands of oil: Brent- the most expensive, Russian Urals 7-12 percent cheaper.

As with other products, the supply and demand market dictates conditions, how much oil will cost.

The cost of oil varies:

• Russian, including transportation and excise taxes, 50-60 per barrel. Or 350-420 per ton.
• Canadian oil is more difficult to extract, therefore, the cost is higher. 90 per barrel. 630 per ton. They will be interested in selling at a higher price.

Oil production is a continuous process and cannot be suspended for a while.

Those countries with high production costs enter into long-term contracts at special prices. These prices are formed based on forecasts.

The largest oil trading platform is NYMEX.

NYMEX Annual Oil Sales - $120 billion per year.

The next most popular oil exchanges are INTERCONTINENTAL Exchange (ICE), exchanges in Shanghai, Dubai, and Tokyo. In total, oil trading takes place on all major exchanges $200 billion per year.

But if we take the cost of oil at $90-120 per barrel, and how much is consumed per year, it turns out that all oil is sold by 8-10 trillion. dollars per year. Question: Where is the remaining significant portion of the oil sold?

It turns out that most oil is bought and sold NOT on the stock exchange, and the exchange serves only as a source of quotes.

Types of contracts

• Over-the-counter at the same prices as on the exchange.
• Over-the-counter with a clearly established price.
• According to the formula.
• Minimum-maximum.
• Futures.

Below we will describe these contracts in more detail.

Consequently, the exchange price of oil is used by companies as landmark, as the basic market equilibrium price.

Numbers

Only about 7% futures contracts concluded on the exchange live up to a specific delivery.

Let's remember the drawing. 200 billion. contracts are concluded, only the 14 billion.

What about the others?

The remaining contracts are “closed”. What does it mean to “close” a contract? Conclude “opposite”. See picture below.

What does it mean to close a contract?

The exchange participant concludes futures contract (futures means for future delivery). The terms of the contract state what he buys 1,000,000 barrels oil with delivery in 6 months. The cost of one barrel of oil will be 60 $ .

Right on the same day, the same exchange participant enters into an opposite contract, that is, he sells 1,000,000 barrels of oil, but for 61$ .

The benefit of the deal is obvious: the exchange participant will earn $1,000,000 in one day.

And this does not mean that he will have to physically accept the goods - oil under one contract and physically deliver under another.

The exchange operates a clearing procedure. Counter obligations will be extinguished.

Warranty

When an exchange participant trades, he does not have to lay out everything 60 million for oil, he only promises to pay this amount in return for the promise of oil delivery, securing this promise with a guarantee amount of 1.8 million dollars.

Despite the apparent simplicity of the transaction and the opportunity to make easy money, in reality everything is more complicated. There is a constant risk that the price of oil may fall, in which case the exchange participant will lose money. The only one who always wins is the auction organizers.

$14 billion

Of these, they deal with the physical supply of oil only 1%, that is 140 million The rest is paid off in money, playing on the difference between the current contract price and the price of concluding a new resale contract. Let's remember our drawing, here it is presented in its finished form.

That is, we can conclude that against the background of the total amount of oil supplies of 200 billion, only 14 billion are provided by contracts, of which only 140 million survive to the physical delivery associated with a specific substance and tankers.

Stock game

People who trade oil do not have not the slightest concepts about physical properties product, since they do not buy oil to make gasoline or kerosene, they buy it to resell and make money on the difference.

We can say that what is traded on the stock exchange is not a real product that can be touched and which has a specific value backed by something, but rather forecasts and ideas. And whoever was able to give the most convincing forecast wins this game.

Types of players on the exchange

Each player on the stock exchange must choose a strategy for his game. Or he says that a crisis has begun and oil consumption will be less, then the “bears” will support him. Or he says that OPEC countries have agreed to reduce oil production and then oil prices will soar. The “bulls” will be at the same time with him.

Who determines the forecast for world oil consumption?

Who will the exchange participant listen to when choosing his game strategy? To the most famous oil companies. And the most famous oil companies are from USA and EU.

US and EU companies have the greatest influence on the outcome of exchange trading, and, consequently, on the price of oil.

Why will the main players never lower the price of oil “below the baseboard”?

Below is the answer to this question.

Firstly, OPEC countries are restraining factor. This is why this organization was created, uniting 12 countries, the main oil exporters. These countries may decide to produce less oil, thereby increasing demand.

Secondly, oil is the main expense item at many enterprises. The USA, EU, China, Japan are the main consumers of oil. The US controls the oil market. Companies from these countries and EU countries compete with each other. For the United States, the price of oil is a lever that allows it to keep the world economy either on a “short leash” or to give some kind of relaxation. This principle works like this: when oil prices rise, companies are forced to spend more, hence their growth rate decreases. And, conversely, when low prices Ah, oil companies' growth rates are gaining momentum.

Thirdly, US and UK companies invest into oil production in countries with the largest oil reserves and seek special oil prices for themselves. That is, they buy oil at a fixed price, so they do not suffer much due to price fluctuations on the exchange.

Fourth, depends on the price of oil capitalization(an indicator characterizing the scale of operations on the stock exchange), which must constantly grow in order to have a reason to raise prices on the stock exchange and make money from it.

If oil market participants suffer losses...

Many people are interested in the question: what happens to participants in the oil exchange if they do not guess the price correctly and suffer losses.

Let us remind you who the participants in the oil market are and tell you about each of them.

• brokers
• oil companies
• banks and stock players
• US government
• ruling dynasty Saudi Arabia(Saudis)

Brokers. As a rule, no one on the stock exchange doesn't sell his own money. If the players lose something, then they lose the clients' money. They are guided by forecasts and ideas that are formulated by the US government and the EU.

Oil companies, as a rule, purchase oil at fixed prices. If the purchase price of oil increases, they will make their profit on the final product - gasoline, polyethylene, kerosene, etc. That is, the end consumer, you and I, pays for their losses.

Banks and stock players. In case of losses they can buy up bankrupt companies.

US government. With severe financial losses, the United States will acquire another geopolitical trump card. By lowering the price of oil, they think they will weaken Russia's position.

Saudi Arabia, refusing to cut oil production at the request of OPEC. Let's start with the fact that their oil costs are low. It is profitable for them to sell large volumes; they still make a profit.

We hope we have clearly and simply explained how the global oil market works. Now that the price of oil is falling, it is especially useful to understand why this is happening. If you are interested in reading what the price of oil is made up of, read our article.

A comparison table of gasoline prices around the world can be found here. Data is updated daily.

Oil is a natural oily flammable liquid consisting of a complex mixture of hydrocarbons and some other organic compounds. The color of oil is red-brown, sometimes almost black, although sometimes slightly yellow-green and even colorless oil is found; has a specific odor and is common in sedimentary rocks of the Earth. Today, oil is one of the most important minerals for humanity.

Oil is found together with gaseous hydrocarbons at depths from tens of meters to 5-6 km. However, at depths greater than 4.5-5 km, gas and gas-condensate deposits with a small amount of light fractions predominate. The maximum number of oil deposits is located at a depth of 1-3 km. At shallow depths and at natural outcrops earth's surface the oil is converted into thick malta, semi-solid asphalt and other formations - such as tar sands and bitumen.
Oil is a non-renewable resource. Proven oil reserves at the beginning of 2012 amounted to 288.75 billion tons (1650 billion barrels), undiscovered reserves are estimated at 52-260 billion tons (300-1500 billion barrels). At the same time, the Middle East remains the leading region in terms of raw material reserves with a share of 48.1 percent (795 billion barrels). By the beginning of 1973, the world's proven oil reserves were estimated at 100 billion tons (570 billion barrels). Thus, proven reserves have been growing in the past (oil consumption is also growing - over the past 35 years it has grown from 20 to 30 billion barrels per year). However, since 1984, the annual volume of world oil production has exceeded the volume of explored oil reserves.
In 2012, Venezuela became the world leader in oil reserves, overtaking Saudi Arabia. This is stated in the annual Statistical Review of World Energy, prepared by the oil and gas company BP. According to BP, at the end of 2011, proven oil reserves in Venezuela amounted to 296.5 billion barrels, or about 18% of global reserves. Oil reserves in Saudi Arabia at the end of last year stood at 265.4 billion barrels (16% of the world total).
Canada ranks third in the world in terms of proven oil reserves with 175.2 billion barrels (11% of the world total). Russia, according to BP estimates, has reserves of 88.2 billion barrels (5.3 percent of the world's total) and is the world's second largest oil producer after Saudi Arabia.
There is currently much debate about whether reserve levels will continue to increase in the coming decades or whether most of the world's oil has already been discovered. Proved reserves, the existence and extent of which have been confirmed expert assessment, as opposed to unproven reserves whose existence may be mere speculation, increased by 50% between 1973 and 1990. This trend leads many to believe that future discoveries of additional reserves are imminent. The amount of oil reserves that are currently thought to be recoverable is significantly less than was thought in the 1970s, 1980s or 1990s. For last decade World oil production levels have increased. However, it must still be recognized that the years of low oil prices in the late 1990s and early 2000s discouraged investment in new productivity development and left producers largely unprepared for rising demand. Now, the oil industry is in the process of adjusting, using some of the profits from high oil prices for research and development. These record profits make expensive investments in new technologies and energy sources such as tar sands, primarily located in Canada's Alberta province, economically feasible.
The top 15 oil-producing countries in the world in 2011 were: Russia, Saudi Arabia, United States, China, Iran, European Union, Canada, United Arab Emirates, Iraq, Mexico, Kuwait, Nigeria, Venezuela, Brazil and Angola.
For many years, Saudi Arabia, the world's leading oil producer and exporter, served as a critical buffer, even, according to some experts, a "central bank for oil." Saudi capacity was estimated to be greater than that of Venezuela, Indonesia, Nigeria and Libya combined. This maintained confidence that capacity was sufficient to ensure short-term supply growth in the event of various disasters. Saudi Arabia has used this excess power effectively on several occasions, most notably during the Iran-Iraq War (1980-1988), both Gulf Wars (1990-1991 and 2003), and various periods of instability in Venezuela.
Increased demand, however, has destroyed the value of spare oil production capacity in Saudi Arabia. According to some experts, "for the first time in decades, production has not outpaced demand, leaving the world with no cushion in the event of a sudden, prolonged supply shortage." In response to this situation, Saudi Arabia launched a massive $50 billion investment program in 2005 to to increase output. However, some analysts still question Saudi Arabia's spare capacity and predict it could be exhausted as early as 2013.
Now the leaders in the field of “black gold” export are, respectively, the two leaders in production – Saudi Arabia (oil exports account for 95% of the country’s total exports) and Russia.
Oil from the Middle East flows primarily to the Asia-Pacific region, as well as North America and Europe. Most oil is exported from Russia to Europe, but thanks to new eastern projects and rising oil production on Sakhalin, 30% of Russian exports are expected to go to dynamic countries in the Asia-Pacific region.
The world leader, Saudi Arabia, produced 11.2 million barrels per day in 2011. Russia produced approximately 10.2 million barrels per day in 2011. In 2012, oil and gas condensate production in Russia increased by 1.3% and reached 518 million tons. This is evidenced by data from the Central Dispatch Department of the Fuel and Energy Complex (CDFEC).
Typically, almost all oil producing companies, with the exception of one, managed to increase the volume of raw material production last year. The growth range was from 0.4 to 4.4%. At the same time, supplies of crude oil for processing in Russia increased last year by 3.5% and amounted to 266.159 million tons. The volume of crude oil produced by China in 2012 amounted to 204.59 million tons, which is 1.6% more than in 2011.
Meanwhile, the United States could become the largest oil producer, overtaking both Russia and Saudi Arabia in the coming years. American oil production is rising for the fourth year in a row, thanks to new technologies and falling gas prices. According to the US Energy Department, production of oil and other liquid hydrocarbons in the country increased by 7% in 2012, amounting to approximately 10.9 million barrels per day. This is the fourth year of growth in a row and the biggest jump in production since 1951. In 2013, according to the department's forecast, production will continue to grow and will average 11.4 million barrels per day - a historical record for the United States. Crude oil is practically not used directly (crude oil, along with nerosine, is used for sand protection - securing dune sands from being blown away by the wind during the construction of power lines and pipelines). To obtain technically valuable products from it, mainly motor fuels, solvents, raw materials for the chemical industry, it is processed. Oil takes leading place in the global fuel and energy balance: its share in total energy consumption was 33.6% in 2010. In the future, this share will decrease due to the increasing use of nuclear and other types of energy, as well as increasing costs and decreasing production.
Due to the rapid development of the chemical and petrochemical industries in the world, the need for oil is increasing not only to increase the production of fuels and oils, but also as a source of valuable raw materials for the production of synthetic rubbers and fibers, plastics, surfactants, detergents, plasticizers, additives, dyes, etc. (more than 8% of world production). Among the starting materials obtained from oil for these industries, the most widely used are: paraffin hydrocarbons - methane, ethane, propane, butanes, pentanes, hexanes, as well as high molecular weight (10-20 carbon atoms per molecule); naphthenic; aromatic hydrocarbons- benzene, toluene, xylenes, ethylbenzene; olefin and diolefin - ethylene, propylene, butadiene; acetylene. Oil is unique precisely because of its combination of qualities: high energy density (thirty percent higher than that of the highest quality coals), oil is easy to transport (compared to gas or coal, for example), and finally, it is easy to obtain a lot of the above-mentioned products from oil. The depletion of oil resources, rising prices and other reasons have led to an intensive search for substitutes for liquid fuels.
The dominant story in global oil markets over the past five years has been rising demand. World oil consumption continues to rise, despite occasional declines of 1-2%. Oil consumption increased by approximately 800,000 barrels per day in 2011 and by 900,000 barrels per day in 2012. Oil consumption is expected to grow by only 100,000 barrels per day in 2013, partly due to the Eurozone crisis. The increase in demand mainly applies to developing countries that are not members of the Organization for Economic Cooperation and Development, especially Asia, countries of the former Soviet Union and the Middle East.
However, the single most important driver behind the rise in global oil demand has been China. China needs huge amounts of energy to achieve annual economic growth rates of 7-10%. In the transport sector alone, China is expected to double its oil demand over the next 15 years as the number of cars in China increases fivefold. By 2020, China will import up to 63% of the world's oil, double what the country currently imports. Although, according to a number of experts, the global economic crisis has also reached China, and therefore the rate of economic growth in the Middle Kingdom may slow down.
To ensure security of oil supplies, China has been aggressive in securing guaranteed long-term oil contracts around the world. The tightness of current markets means that supply volumes from traditional oil exporters are already at record levels and have their limits. Therefore, China has been forced to look to less stable suppliers that other countries avoid, such as Sudan, Angola and Gabon. China's strategy has been to use its soft power through loans and other diplomatic measures to develop economic alliances with these countries. Thus, since the mid-1990s, China has invested more than $20 billion in the development of Sudan's oil industry.
Some of China's new partners, such as Sudan, have been deliberately isolated by the international community in order to achieve strategic geopolitical goals, such as persuading the country's government to take a more preventive role in limiting the activities of genocidal militias. Many find China's willingness to "play by different rules" unacceptable, arguing that it undermines the international community's efforts to maintain moral and economic authority over rogue states.
China's success in pursuing this strategy has encouraged other countries to flout international norms in their quest for energy security: India, another energy-hungry Asian giant, has begun to develop closer ties with the regimes of Myanmar and Iran, both notorious for their poor human rights records.
Not everyone agrees, however, with the condemnation of China's policies. Some believe that Chinese "greenfield energy investment" should be encouraged because it enhances global energy security. Such investment is "not a threat, but something desirable because it means there will be more energy available to everyone for years to come, while demand from India and China grows."
The case of rising oil demand in China is a clear illustration of the difficulty of calculating many energy problems. In seeking to meet its own individual energy needs in ways that may be undesirable to the international community, China can nevertheless supply important products to all countries of the world.

Oil production and consumption in the world, million barrels/day*

year	2008	2009	2010	2011	2012
Total production	86.8	85.6	87.5	88.4	91.3
Total consumption	86.5	85.5	88.3	89.1	90.0
Market balance	0.3	0.1	-0.8	-0.7	1.2
Reserves	2679.0	2640.8	2670.0	2603.0	2599.0
Inventory sufficiency, weeks	8.2	8.2	8.2	8.1	8.2
Brent oil price	97.26	61.67	79.63	110.94	109.49
WTI oil price	100.06	61.92	79.40	95.05	95.13
Urals oil price	94.76	61.22	78.21	109.35	112.06
OPEC oil basket price	94.18	61.76	77.38	107.44	106.31

*data from International Energy Agency

Oil prices, like any other commodity, are determined by the relationship between supply and demand. If supply falls, prices rise until demand equals supply. The peculiarity of oil, however, is that in the short term demand is inelastic: rising prices have little effect on demand. Therefore, even a small drop in oil supply leads to a sharp rise in prices.
In the medium term (5-10 years) and long term (decades) demand, however, is continuously increasing due to an increase in the number of cars and similar equipment. According to repeated observations, rising world oil prices are accelerating dollar inflation, and hence, there is an opinion that this is due to the fact that the United States is the largest consumer of oil in the world. However, this theory is probably either wrong or requires more detailed explanation. In addition, relatively recently, China and India became the world's largest oil consumers.
In the 20th century, the growth in demand for oil was balanced by the exploration of new fields, which made it possible to increase oil production. However, many believe that in the 21st century oil fields will exhaust themselves, and the disproportion between the demand for oil and its supply will lead to a sharp rise in prices - an oil crisis will occur. In addition, prices for natural gas significantly depend on the level of prices for oil and petroleum products. Oil prices are also one of the political instruments of the international economy.
In the 1970s, major oil companies and the US government made "Doomsday" predictions, suggesting that oil prices could reach $100-$250 per barrel by the year 2000. Although this did not become a reality in 2000, Energy Information Administration (EIA) statistics show that prices averaged $72 per barrel as early as 2007. Additionally, prices averaged $100 per barrel in 2008, $54 in 2009, $100 in 2011, and $105 in 2012. These implications do not allow us to completely dismiss the futility of the "Doomsday" predictions.
It should be noted that the price of oil also depends on its grade. The introduction of grading was necessary due to the difference in oil composition (sulfur content, different content of alkane groups, presence of impurities) depending on the field. The standard for prices is WTI and Light Sweet oil (for the Western Hemisphere and generally a reference point for other types of oil), as well as Brent (for the markets of Europe and OPEC countries).
To simplify export, certain standard grades of oil were invented, associated either with the main field or with a group of fields. For Russia, these are heavy Urals and light oil Siberian Light. In the UK - Brent, in Norway - Statfjord, in Iraq - Kirkuk, in the USA - Light Sweet and WTI. It often happens that a country produces two types of oil - light and heavy. For example, in Iran these are Iran Light and Iran Heavy.

The level of oil production growth required to maintain stable prices while absorbing a growing labor force is approximately 1.5% (or 1.4 million barrels per day) per year. Considering that the growth rate of oil supplies from non-OPEC countries over the past ten years has averaged 480 thousand barrels per day, the dependence of the world oil market on OPEC is rapidly increasing. This is noted by BofA-Merrill Lynch analysts. However, does OPEC have enough capacity to increase the production of “black gold” in sufficient quantities in the coming years, the bank asks. Amid production losses in Libya and Iran, the cartel has come under increasing pressure over the past couple of years to tap into existing reserves, and as a result has increased production to record highs, thereby significantly reducing available spare capacity.
Much of OPEC's spare production capacity lies in Saudi Arabia, while other OPEC countries with significant reserves are mired in problems. If we exclude Nigeria, Iran, Libya, and Saudi Arabia, the remaining free OPEC production capacity will be only 0.7 million barrels per day. According to BofA-Merrill Lynch analysts, due to a shortage of new projects, the reserve capacity of 11 OPEC countries will be at minimal levels in the next five years. In Kuwait, Qatar and Ecuador there are no projects planned for development at all, and a slight increase is expected in Algeria. In Angola, Nigeria and Venezuela, new projects may suffer from chronic disruptions and poor production safety conditions. Minimal production growth is expected in the UAE. In addition, the bank indicates that the increase in capacity expected in Saudi Arabia will most likely only mitigate the decline in production at existing fields.
Taking into account the uncertainty and prospects for the growth of free production capacity in 11 OPEC countries, BofA-Merrill Lynch analysts note that oil production in Iraq is becoming critical for the global oil market. The country's oil production is growing at a phenomenal rate, recently reaching a record high of 3.2 million barrels per day, up from an average of 2.4 million barrels per day in 2010. From a technical point of view, oil projects in Iraq are among the least complex in the world, and also among the cheapest in terms of capital costs and operating expenses. “Yet, although the potential is enormous, we are cautious about the prospects for Iraq, as politics, security and infrastructure pose great challenges to oil development in this country,” BofA-Merrill Lynch warns. “At this time, we expect that In 2017, oil production in Iraq will average 4.9 million barrels per day, while the Iraqi government's target is 9-10 million barrels per day."
Fast pace The advent of new technologies in science and technology offers what many hope is a chance that the oil industry will one day be able to exploit reserves that are currently considered unprofitable.

Gas production is barely growing

Global production natural gas Last year it grew by only 21 billion cubic meters. m, or by 0.3%. If we exclude 2009, when production fell in the immediate aftermath of the global financial crisis, this would be the sector's weakest growth in 34 years. This is mainly due to the fact that gas production in the United States fell in 2016 for the first time since the “shale gas revolution” began in the mid-2000s. Gas prices in the US (Henry gas hub) decreased by 5% in 2016, prices in Asian and European gas markets fell by 20-30%.

In the liquefied natural gas (LNG) market, China remains the largest source of import consumption growth, but a notable feature of 2016 was the entry or expansion of new buyers such as Egypt, Pakistan, Poland, Jordan, Jamaica, Colombia, Lithuania. Especially interesting picture is emerging in the European market, which is seen as a natural direction for LNG supplies.

Despite this, in 2016 the advantage was clearly on the side of pipeline gas from Russia, which supplied 166.1 billion cubic meters to Europe. m (this is 40% of pan-European gas imports). “The economic motives in this battle of competing supplies are clear: just as was the OPEC response to the rise of US shale oil, Russia has a strong motivation to fight to maintain its market share in the face of growing competition from LNG,” BP writes.

Coal consumption is falling

In 2016, the share of coal in global primary energy consumption fell to its lowest level since 2004 (28.1%). The country with the record for reducing coal consumption was Great Britain (-52.5%), where it fell to the level of the industrial revolution of the 18th-19th centuries. In April 2017, the UK electricity sector recorded its first “coal-free day”. At the same time, in general, the decrease in consumption was achieved primarily due to the USA (-8.8%) and China (-1.6%). In Russia, coal consumption fell by 5.5% amid an increase in hydroelectric power generation (+9.5%).

Global coal production fell by 6.2% (231 million tons of oil equivalent), the largest drop on record. In China, the figure also decreased by a record 7.9%, or by 140 million toe; in the USA, it fell by 19%, or by 85 million toe. In Russia, on the contrary, coal production increased by 3.1%, with an average growth of 3.2% over the past ten years.

China boosts renewable growth

The fastest growing source of energy in 2016 was again renewable energy sources (RES). Currently, renewable energy sources account for slightly less than 3.2% of global primary energy consumption. Excluding hydropower, renewable energy consumption increased by 12%, demonstrating the largest annual increase on record (+53 million toe). More than half of the growth in this sector was provided by wind energy (+16% per year). Solar energy production increased by 30%. And although solar energy accounts for only 18% of renewable energy production, it provided almost a third overall growth renewable energy sources.

China has become the largest country producing renewable energy sources used in the electric power industry, surpassing the United States. The Asia-Pacific region has surpassed Europe and Eurasia in this indicator.

Russia reduces primary energy consumption

Global primary energy consumption grew by just 1% in 2016, in line with the previous two years. Most of the growth was provided by two rapidly growing economies - India (+5.4%) and China (+1.3%). Average height energy demand in 2015 and 2016 was the lowest in any two-year period since 1997-1998. Despite slowing energy demand growth, China posted the world's largest increase in primary energy consumption for the 16th year in a row. Demand growth in developed countries of the Organization for Economic Development and Cooperation (OECD) remained virtually unchanged, increasing by only 0.2%.

In Russia last year, primary energy consumption decreased by 1.4%, which did not prevent it from remaining in fourth place in terms of energy consumption (after China, the USA and India) with 5.1%.

Oil consumption in Russia resumed growth (+2.1%), despite the ongoing economic downturn. Gas remained the main fuel, providing 52% of primary energy consumption in Russia. Coal consumption fell by 5.5%, mainly due to increased hydroelectricity generation (+9.5%). Oil and coal accounted for 22 and 13% of primary energy consumption, respectively. The production of primary resources in the country increased by 1.8% over the year.

Oil production increased by 2.2% (above the ten-year average of 1.4%). A similar situation was observed in gas production (+0.5%; -0.1%) and hydroelectric power generation (+9.5%; -0.3%). Coal production increased by 3.1% (3.2% ten-year average). Russia accounted for 12.2% of world oil production, 16.2% of gas and 5.2% of coal. Russia has maintained its position as the world's largest exporter of oil and gas. In 2016, Russia exported 77% of oil produced, 33% of gas and 55% of coal.

The increase in electricity production from nuclear power plants was lower than the ten-year average (+0.3%; +2.8%), while from renewable sources it was higher (+6.9%; +4.0%). The share of renewable energy sources in Russian primary energy consumption is only 0.02%.