BP Annual Report and Form 20-F 2011 - Company Reporting

Our marketIn 2011, energy markets proved resilient, withcontinued growth despite volatile conditions in theglobal economy.Left Modernizationwork at BP’s Whitingrefinery, Indiana, madesignificant progressin 2011, with thecompletion of a newpipeline to Canada.Right Operationsat our East Azeriplatform. BPproduction inAzerbaijan is animportant source ofnatural gas for marketsin Western Europe.The growth in world oil consumption slowed in 2011, albeit with continued robustgrowth in China and certain other non-OECD countries partially offsetting anoverall decline in OECD countries. However, despite the slowdown in demand,average crude oil prices in 2011 were significantly higher than in the previous year,exceeding $100 per barrel for the first time (in nominal terms). Natural gas pricesdiverged globally in 2011. Globally, refining margins improved on average as oilproduct demand continued to grow.Economic contextAfter a very strong 2010, world economic growth slowed in 2011 and we expectsubdued global growth to continue in 2012. Emerging economies with strongerproductivity and rising populations led by China and India are set to drive growth,while developed countries may lag behind as they seek to address their internalfiscal imbalances.Energy demand, and in particular oil demand, has followed overall economictrends in recent years, recovering strongly in 2010 but facing more challengingconditions in 2011, especially in OECD markets.Concerns about the volatility of commodity and financial markets, energysecurity and climate change have led to continued debate over the appropriaterole of markets, government regulation and other policy measures that affect thesupply and consumption of energy. Given the pressures in the sector, we expectregulation and taxation of the energy industry and energy users to increase inmany areas in the future.18 BP Annual Report and Form 20-F 2011