The year 2013 will be a landmark one for the global oil market. That is when oil consumption from outside the OECD will exceed that of OECD economies for the first time ever, reflecting the locus of energy consumption patterns shifting east. According to EIU forecasts, in 2013 the OECD will consume 45.45m b/d of crude oil, while the rest of the world will consume 46.84m b/d. Between 2009 and 2013, oil demand is set to increase by 7m b/d in non-OECD countries and decrease by 200,000 b/d in the OECD.

China, of course, will be the main driver of non-OECD demand growth, with its oil consumption hitting the 10m b/d mark in 2012 and reaching 10.8m b/d in 2013. In 2013, nearly 25% of global oil demand will come from non-OECD Asian economies, where oil consumption will exceed that in the US. As the Asian region is resource poor when it comes to oil, its import needs will dramatically increase, providing a new opportunity for OPEC producers in the Middle East whose market share in the US, the world’s largest market, is declining. Demand for oil is also growing in the Middle East, however, which will leave fewer barrels available for export.

The EIU's Energy Briefing provides ten-year forecasts and daily news analysis for the world's most important energy markets, along with a database developed in association with the International Energy Agency.

The US oil market has been changing quietly over the last half-decade or so. In 2005, US oil consumption peaked at 20.8m barrels/day (b/d), with the use of motor gasoline contributing nearly half of the total. Since then, each new year saw demand drop. According to the US Energy Information Administration, oil consumption dropped to 18.87m b/d in 2011 (a fall of 9% since 2005), and is forecast to only rise slightly to 19.01m b/d by 2013. Gasoline demand is now in the doldrums at just below 9m b/d, having peaked in 2007 at 9.29m b/d.

Why is this the case? Fuel prices have risen, sales of light trucks have slowed, and tighter fuel economy standards have been introduced. The recent recession also led Americans to drive and fly less than they were previously accustomed to. Demand for residual fuel oil, used for power generation and by heavy industry, is also slipping. Now, refineries are exporting oil products, especially gasoline and distillates (heating oil and diesel), to Latin America, where demand for oil products is growing.

Meanwhile, the Obama administration is discouraging a revival in transport fuel demand as part of its strategy to reduce oil consumption, and thus imports. Last year, the president announced an agreement with automakers to boost fuel economy to 54.5 miles per gallon (mpg) for cars and light-duty trucks by the 2025 model year, building on a previous agreement to increase fuel economy to 35.5 mpg, from 27.5 mpg, by 2016.

Until a few years ago, it seemed that the US’s love affair with petroleum would lead it down an irreversible path of increased dependency on oil imports. Now, signs suggest that Americans may be falling out of love with petroleum.

The EIU's Energy Briefing provides ten-year forecasts and daily news analysis for the world's most important energy markets, along with a database developed in association with the International Energy Agency.

In November, we discussed Iran’s major oil export markets in the light of rising tensions with the West over Tehran’s nuclear programme. This hostility has contributed significantly to higher oil prices, with Brent crude oil futures settling at around $113/barrel, an increase of 9% since mid-December.

The US and the EU both recently announced tighter restrictions on Iranian oil exports, which provide around 50% of the Islamic Republic’s government income and 80% of its export revenue. An EU ban on Iranian crude oil would hurt Iran more than it would hurt the EU, but the extent of this impact would depend on whether other countries, especially in Asia, co-operate with Western efforts to cut Iranian oil imports.

Any meaningful ban on importing Iranian oil would require replacement from other producers, leaving additional supplies from key exporters like Saudi Arabia putting pressure on spare capacity. The International Energy Agency puts the Opec cartel’s spare capacity at around 3.1m barrels per day (b/d). The majority of this belongs to Saudi Arabia, which has already increased production to 10m b/d, from 9m b/d in mid-2011.

An outright ban on Iranian oil imports by the EU would require about a fifth of Opec’s spare capacity to make up the difference, while a global ban on Iran’s output would soak up around 80% of the cartel’s spare output. Needless to say, both possibilities imply much higher oil prices. For this reason, the last thing a weak global economy needs is for Iran’s relations with the West to pass the point of no return.

The EIU's Energy Briefing provides ten-year forecasts and daily news analysis for the world's most important energy markets, along with a database developed in association with the International Energy Agency.