Oil Shipping Costs Are Rising: The World Oil Demand Perspective.

Oil is, and will remain for the foreseeable future, the most important of the fossil fuels that have powered the modern economy for two centuries.

Conventional oil in 2002 accounted for almost 39% of commercial energy consumed worldwide. Coal was next, accounting for a little less than 25%. Natural gas accounted for more than 24%. The rest was shared almost equally by nuclear energy and hydro-power.

World demand for oil by 2030 would have risen either to 120m b/d in a conservative estimate made by the IEA, or to an accelerated scenario of 155m b/d made by APS Energy Group. The call on OPEC oil by then would have risen either to 64.9m b/d in the IEA scenario or to 111m b/d in the accelerated case. The Middle East, which in 2002 accounted for 32% of world oil production, should by 2030 be producing between 51.4m b/d as the IEA says and 96m b/d in the accelerated case.

These forecasts are based on the assumption that oil will continue to compete with alternative sources of energy. By 2030, nearly 5 bn (61%) of the world's 8.1 bn people will have become urban consumers, compared to less than 800m before World War Two. By then, some Western bankers predict, China's GDP would have exceeded that of the US and become the main engine for world economic growth.

The Middle East countries would only be able to meet world oil demand if they expand their reserves base through a concentration of major operators, as in the case of the North Sea. In that case, Iraq alone could have more than 325 bn barrels of recoverable oil. Even if Iraq's current 112.5 bn-barrel reserves base were exploited at the same rate as the 85 bn barrels in the OECD, then its production should eventually reach 25m b/d (see OMT No. 22).