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Picture This: Middle East to Dominate Word Oil for Many Years

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
March 2003
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OIL HAS DOMINATED world energy consumption for many decades, although its share has declined from almost 50 percent in 1975 to about 40 percent at present. This decline is due to improvements in energy efficiency; consumers’ switch to substitutes, including coal and natural gas; a desire to reduce dependency on foreign oil, largely because of the oil price increases of the mid-1970s to the early 1980s; and recent concerns about global warming and climate change.

The International Energy Agency (IEA) predicts that, by 2020, world energy demand will increase by about half from its current level, with the share of oil holding at 40 percent—still the dominant fuel—while the share of gas will increase from about 23 percent to about 26 percent. Demand growth will be fastest in developing regions, where income growth and industrialization have continued to gather pace.

The rising demand for oil

Although the demand for oil increased less than that for gas between 1975 and 2001, the share of oil in world energy consumption remains higher. (million tons of oil equivalent)

Source: International Energy Agency, World Energy Outlook, 2001 (Paris).

Growth in reserves outpaces productionProven oil reserves in the Middle East and North Africa region grew by almost 79 percent between 1975 and 2001, while the region’s production increased by only about 15 percent.
ReservesProduction
(billion barrels)(million barrels per day)
1975200119752001
MENA406.6727.522.626.1
North America47.163.912.614.0
Former Soviet Union83.4165.410.28.7
OECD Europe25.618.70.86.8
Sub-Saharan Africa27.034.72.24.0
South America35.4296.03.77.0
China20.024.01.63.3
Asia Pacific21.219.82.34.6
Sources: BP-Amoco, BP Statistical Review of World Energy (London); International Energy Agency, World Energy Outlook, 2001 (Paris); Organization of the Petroleum Exporting Countries; and IMF staff estimates.

Included the former centrally planned economies of Eastern Europe.

Included Mexico.

Sources: BP-Amoco, BP Statistical Review of World Energy (London); International Energy Agency, World Energy Outlook, 2001 (Paris); Organization of the Petroleum Exporting Countries; and IMF staff estimates.

Included the former centrally planned economies of Eastern Europe.

Included Mexico.

THE MIDDLE EAST and North Africa region has the world’s largest proven reserves of crude oil, accounting for almost 70 percent of global reserves at the end of 2001, but it produces only about 35 percent of global oil output. The Middle Eastern members of the Organization of the Petroleum Exporting Countries hold 95 percent of the organization’s existing spare capacity, making them the suppliers of last resort. Indeed, most other producers are operating at close to full capacity and play only a marginal role in meeting unexpected supply shortfalls. While oil exploration and production in the former Soviet Union, Africa, and South America have increased in recent years, production in the North Sea and elsewhere is declining.

Oil guzzlers

North America’s oil consumption now accounts for about 31 percent of world oil consumption while the Middle East and North Africa accounts for about half of world oil exports. (million barrels per day)

Sources: International Energy Agency, World Energy Outlook, 2001 (Paris); BP-Amoco, BP Statistical Review of World Energy (London); Organization of the Petroleum Exporting Countries; and IMF staff estimates.

1For consumption, North America included Mexico in 1975.

2In 1975, included exports from the Soviet Union, Eastern Europe, and China.

3For exports, Mexico was included with South America in 1975 but with North America in 2001.

4For exports, China was grouped with Asia in 2001.

5In 2001, included unidentified trade; the amount for 1975 was zero.

The unpredictable price of oil

Dramatic fluctuations in world prices over the past 25 years have posed a major policy challenge to oil-producing and oil-consuming countries alike. World oil prices(dollars per barrel)

Source: IMF, World Economic Outlook database and staff estimates.

WITH OIL exports from MENA projected to more than double by 2020, this region will continue to dominate the oil market for the foreseeable future.

The world’s largest consumers are the United States, 26 percent; European industrial countries, 20 percent; and Japan and Korea, 11 percent. In 2020, according to IEA projections, these countries’ dependency on imports to meet their oil needs will rise from 53 percent of total oil consumed currently to 70 percent, highlighting the growing lack of congruence between the location of oil reserves and the major consumers of oil.

Bright E. Okogu is a Senior Economist in the IMF’s Middle Eastern Department.

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