BP: Oil Consumption In 2009 Dropped First Time Since 1982

BP plc (NYSE: BP) has found a place in the oil business beyond being one of the largest polluters in the industry’s history.

The company released extensive numbers on the use of crude in 2009 in its 2010 BP Statistical Review of World Energy. The firm said that the recession pushed down global oil consumption last year compared to the previous year, the first time that has happened since 1982. That would make sense because the 1982/1983 recession was as brutal as any in the last century.

For the world as a whole, primary energy consumption fell by 1.1 per cent in 2009, the first decline since 1982. Consumption in the industrialized countries of the OECD fell by 5 per cent – more than their decline in GDP; those countries consumed less energy last year than ten years ago

Unfortunately for oil consumers, that trend has already reversed itself in 2010, so the promise that slack demand will result in low crude prices has disappeared.

Commenting on the data highlights in the review, Iain Conn, Group Managing Director and Chief Executive of Refining & Marketing said: “Last year’s decline in global energy consumption was rare; and where we have data so far in 2010 energy consumption is again on the rise

The BP data confirms what research firms and major oil company associations have said for the last several quarters. Crude consumption in the largest nations, particularly the US and China, is moving inexorably higher. The US increase is due largely to rising consumer spending on gas and heating oil. Chinese demand is driven by the rapid expansion of its infrastructure and transportation systems. China’s net imports of oil in the first quarter hit a record.

The supply problem is likely to worsen. The BP disaster in the Gulf will shutter most deepwater drilling in the U.S. This represents a small part of the world’s oil production, but every bit of crude supply is important in a world in which OPEC production is not rising and exports from other producers  including Mexico and Russia are actually declining.

The exploitation of new deposits could also be slowed by the Deepwater Horizon calamity.  Most of the new oil discovered in the last several years is far below the oceans in the Gulf,  off Africa and Brazil. It remains to be seen if there will be any restrictions on tapping these areas. A country such as Brazil might choose to delay deepwater drilling until it can assess the risks that it poses. On the other hand, Brazil may simply want an influx of sales to its huge Petrobras state-owned oil company and could forego any delays based on environmental concerns. That is a distinct possibility if its attitude toward rain forests is any indication.

It is ironic that BP should be the bearer of important news about global crude supply and demand. At least it is not entirely the one-dimensional company that the Gulf oil spill has made it out to be.

Douglas A. McIntyre