World Energy Outlook 2006

higher oil prices. Exceptional factors, including a surge in Chinese demand for
heavy fuel oil and distillate for power generation due to delays in
commissioning new coal-fired power stations, added to the strength of global
oil demand in 2004 (CBO, 2006). A slowdown in the world economy was the
main cause of the deceleration of oil demand in 2005, though much higher
prices probably also contributed.
Non-transport oil use, which is most sensitive to price changes, explains most
of the recent fluctuations in total oil demand. Between 1998 and 2004 – the
last year for which we have a detailed sectoral breakdown – non-transport
demand increased by 1.3%, little more than half the rate of increase in
transport oil use. Non-transport demand actually fell in absolute terms in
2002, largely owing to the lagged effect of the surge in prices in 1999 and
2000. According to preliminary estimates, the slowdown in total oil demand
in 2005 was also largely due to a levelling-off of non-transport demand –
especially in China (where oil use in power generation is thought to have fallen
sharply) and the rest of developing Asia. As the analysis of the previous section
has shown, transport demand is relatively price-inelastic. In fact, transport
demand has generally risen with real GDP in an almost constant linear fashion
since the late 1980s (Figure 11.12).
mb/d
90 1971 1980 1986 2005
80
70
60
50
40
30
20
GDP (trillion $ in year-2005 dollars, PPP)
Total
Non-transport sectors
Transport sector
10
15 20 25 30 35 40 45 50 55 60 65
Note: 2005 data are estimated.
Source: IEA analysis.
Figure 11.12: World Oil Demand and Real GDP
290 World Energy Outlook 2006 - FOCUS ON KEY TOPICS
© OECD/IEA, 2007