The demand for oil and petroleum products is the most crucial prerequisite of Concordia Maritime’s business. Despite increasing utilisation of renewable energy sources, the consumption of oil – and thus also the demand for tanker transport – is expected to continue to rise in the years ahead.
Since the mid-19th century, when it became possible to extract oil in a rational way, oil has played a central role in the development of modern society. Since then, and with a few exceptions, total global consumption has risen continuously. In the last 30 years, total global consumption of oil has almost tripled, from about 30 million barrels of oil per day to more than 86 million barrels per day.
Today, oil and petroleum products are the single largest commodity group in international trade. A high energy content in combination with the fact that it is relatively easy to transport and store has made oil the leading global energy raw material. Although global dependence on oil is decreasing relatively speaking, it still meets more than a third of the total global energy requirements.
Oil consumption expected to increase
A general desire to reduce the volume of carbon dioxide-related emissions in combination with at times a record-high oil price has resulted in a greater focus on other types of fuels and energy sources. For example, there has been a large increase in the utilisation of renewable energy sources, not least windpower. In terms of total global energy consumption, the share of the renewable energy sources has increased 15 per cent in the last five years.
From an environmental perspective, this is, of course, a positive trend. However, this trend has begun at a low level and in the future, growth must increase sharply if it is to keep pace with the anticipated increase in energy consumption. The US Department of Energy estimates that total global consumption between 2005 and 2030 will rise 50 per cent with oil expected to account for 35 per cent of this increase.
Growing demand for tanker transportation
With rising consumption of oil, the demand for safe and efficient transportation of oil will also continue to rise. The expansion of refining capacity currently taking place in locations far from the end users, which is resulting in longer transport distances, benefits the market. For a niche player such as Concordia Maritime, with vessels designed for specific needs, this represents continuing good opportunities for business in the future.
Developments on the oil market
In 2008, global trade in oil was heavily affected by the current financial crisis, the downturn in the world’s economies, at times record-high oil prices and relatively warm weather in the US and Europe.
Taken together, these factors contributed to a continued growth in demand although at a much lower rate. Total global growth was a record-low 0.33 per cent. In 2008, the individual regions’ and countries’ consumption of oil followed more or less the same pattern as in recent years. In North America and Europe, consumption continued to fall while it rose steeply in the Middle East and several developing countries, not least China and India. Total demand was 86.19 million barrels per day.
Continued limited production capacity
High oil prices in recent years are largely a consequence of high global demand for oil in combination with a lack of investments in new production capacity. During the “oil crises” in the 1970s, large price hikes resulted in lower demand. For the oil-producing countries in OPEC, this meant that much of their production capacity was idle for long periods. At the end of the 1990s, history repeated itself when OPEC decided to raise production capacity at the same time as Asia slid into a deep depression and the demand for oil fell once again. These two events have contributed to a large degree to a cautious attitude towards investments in overcapacity.
To this can be added a new phenomenon; a shortage of refinery capacity. As a result of tough environmental regulations and large investments costs, the construction of new refineries is no longer keeping pace with the rising consumption of oil. When demand is high and extraction capacity is limited, every threat of disruption in the global supply of oil tends to result in large price movements. In 2008, the price of oil was driven up by several oil-related geopolitical events, such as the threat of a Turkish invasion of Iraq and violence in Nigeria and the Middle East.