The most influential Megatrends set to shape the world through 2030, identified by Euromonitor International, help businesses better anticipate market developments and lead change for their industries.
Economic growth in emerging market economies has a direct impact on energy demand. Together, these economies are expected to account for a major proportion of increases in global oil demand by 2030 to support their rapid growth.
With rising demand for oil and other energy resources, these economies will significantly impact oil consumption and prices in the coming decades. However, the impact of oil price volatility on an oil producing and a non-oil producing country varies to a large extent.
Exports of mineral fuels: 2009
% of total exports
Source: Euromonitor International from United Nations, UN Trade StatisticsNote: (1) Emerging market economies covers 25 key economies which include Argentina, Brazil, Chile, China, Colombia, Egypt, Hungary, India, Indonesia, Kazakhstan, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Romania, Russia, Saudi Arabia, South Africa, Thailand, Turkey, the UAE, Ukraine, and Vietnam. (2) Exports of mineral fuels include coal, coke and briquettes; petroleum, petroleum products and related materials; gas, natural and manufactured; electric current.
The consumption of energy resources in emerging market economies (EMEs) increased at an alarming pace between 2004 and 2009 to keep up with the rapid economic growth. Despite the 49.4% rise in crude oil prices (WTI Cushing) between 2004 and 2009, primary consumption of energy in EMEs increased by 30.2% during the same period reaching 5,149 million tonnes of oil equivalent in 2009; of which China alone accounted for 62.2% of the increase between 2004 and 2009;
China and India were the world’s second and fourth largest energy consumers in 2009 and both economies are highly reliant on energy imports. During the year, China had the largest absolute value of mineral fuel imports within EMEs with net imports of mineral fuels rising to US$103 billion from US$33.5 billion in 2004. India had the second largest imports of mineral fuels amongst EMEs in 2009 with the value of net imports of mineral fuels almost doubling between 2004 and 2009 to US$50.9 billion;
In 2009, Saudi Arabia was the world’s largest oil producer and net oil exporter, followed by Russia. Exports of mineral fuels in Saudi Arabia and Russia accounted for 88.1% and 63.8% of total exports with net revenues from mineral fuel exports increasing by 116% and 95.2% respectively between 2004 and 2009 reaching US$239 billion and US$192 billion in 2009;
The dependence on energy and energy related products varies across EMEs. China, India and other non-oil producing countries face rising costs of energy import bills in line with global oil prices affecting businesses, consumers and governments. In order to support growth, many of these governments offer subsidies on energy related products which is an additional burden on government finances;
On the other hand, countries like Saudi Arabia, Russia, the UAE and Kazakhstan thrive on exports of mineral fuels. While oil producing countries have generally benefitted from the new highs of global oil prices between 2003 and 2008, export revenues slumped in 2009 with the sharp fall in oil prices resulting in a slowdown for many of these economies during the same year.
Dependence on oil varies across EMEs
China, Russia and India were the largest consumers of energy in EMEs in 2009. However, while China and India have limited domestic energy resources and are net importers of mineral fuels, Russia was the second largest oil producer and net oil exporter in the world in 2009 having the world’s largest natural gas reserves;
In 2009, China’s primary consumption of energy at 2.2 billion tonnes of oil equivalent alone was higher than the combined energy consumption of Russia (700 million tonnes of oil equivalent) and India (460 million tonnes of oil equivalent);
Saudi Arabia and the UAE are the world’s largest and third largest net oil exporters in 2009. Saudi Arabia is highly dependent on its oil and gas resources and is estimated to have one-fifth of world’s proven oil reserves in 2009 and maintains the world’s largest production capacity. The UAE, on the other hand, is extremely rich in hydrocarbon resources. Consumers and business in both countries have access to cheap energy resources. Gasoline prices in Saudi Arabia stood at only US$0.16 per litre in 2008 when prices peaked elsewhere in the world;
In emerging Latin America, Mexico and Brazil had the highest oil production in 2009. Revenues from oil production are a crucial factor driving economic growth in Mexico and the economy has benefitted from the peak of oil prices in H1 2008. However, oil production in Mexico is dropping and proven reserves are also decreasing rapidly. As a result, many analysts believe that the country could become a net importer of mineral fuels in a few years.
Top 10 largest energy consumers in emerging market economies: 2004 and 2009
million tonnes of oil equivalent
Source: Euromonitor International from BP Amoco, BP Statistical Review of World Energy.
Growing potential for oil exporting countries
Oil exporting economies have generally benefitted from rising oil prices between 2003 and 2008 with high export revenues which has boosted economic growth. In the UAE, for instance, export revenues from oil are not only a significant driver of the economy but also a major source of government revenue. Between 2003-2008 the economy grew at an annual average rate of 8.3% and real GDP in other oil exporting economies like Russia and Kazakhstan also experienced robust growth averaging 7.1% and 8.6% per year;
However, the financial crisis of 2008 severely affected demand for exports of mineral fuels, causing oil prices to fall sharply and export revenues to slump. In Russia, for example, annual real GDP contracted by 7.9% in 2009 and the value of exports fell by 35.5% year-on-year with exports of mineral fuels alone declined by 35.4% annually;
Nonetheless, the rebound in oil prices in 2009 has helped support the recovery within these economies. Oil prices averaged US$80.1 per barrel between January-April 2010 compared to US$44.6 per barrel during the same period in 2009 and are expected to reach US$100 per barrel by 2020. As global recovery strengthens, global demand is likely to remain buoyant and oil prices will continue to rise boosting oil revenues and increasing the investment and spending potential in these economies;
In addition, consumers and businesses both benefit from access to cheap energy sources in oil exporting economies. Gasoline prices in Saudi Arabia, Egypt and the UAE are amongst the cheapest in the world (US$0.15 – 0.35 per litre).
Crude oil prices: January 2004 – December 2009
US$ per barrel
Source: Euromonitor International from EIANote: Data refers to average monthly prices.
Challenges for oil importing countries
Energy consumption in emerging Asia continues to grow exponentially fuelled by rapid economic and population growth:
Rising imported energy costs is the biggest challenge faced by non-oil producing EMEs or countries with insufficient domestic production. China was the fourth largest spender in the world on mineral fuel imports in 2009 with India trailing behind in seventh place. In order to fuel the rapid expansion in their economies, demand for oil is likely to remain high for years to come in EMEs, particularly emerging Asia. This will keep oil prices buoyant and import costs elevated;
Many governments of non-oil producing EMEs offer subsidies on energy products to make it more affordable for consumers and businesses and help support growth at the cost of government finances being compromised. Also, consumers and business still bear the brunt of oil price volatility, as these prices of energy related products are still comparatively higher than oil producing countries and translate into increased cost of many goods and services such as transportation and food;
High levels of inflation caused by raised energy prices and food price inflation is a persistent concern in many non-oil producing EMEs and affects both businesses and consumers. For many of these countries, a large proportion of the population is unable to cope with the rising cost of necessities.
Although aggregate world energy demand plunged in line with the global economic crisis of 2008-2009, it is recovering quickly largely on account of growing demand from EMEs, particularly emerging Asia:
According to International Energy Agency’s World Energy Outlook 2009, China is expected to overtake the USA around 2025 to become the world’s largest spender on imported oil and gas, while India is likely to overtake Japan soon after 2020 to become the world’s third largest importer;
In the longer term, non-oil producing EMEs will aim to reduce their dependence on oil by diversifying energy sources and using biofuel, nuclear energy and other renewable energy solutions such as solar energy, wind energy and hydropower. Brazil, for instance, has managed to reduce external oil dependency through the production of ethanol which is used as fuel in cars;
Russia and Middle Eastern countries like Saudi Arabia and the UAE will increase their market power as they will have significant influence over oil prices and will be the few remaining countries in the world with high concentration of conventional oil and natural gas reserves.