Consumption of and trade in non-renewables

Consumption of and trade in non-renewables

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Consumption of and trade in non-renewables - Oil.

Western Europe and Japan are heavily dependent on oil imports because production cannot meet massive domestic demand. The USA is the world's largests per-capita oil consumer. However, it produces much of its own requirements. Producers in the middle east, where oil is cheap, are also heavy users. Poorer countries consume much less oil per head. Rapid industrilaisation in China has resulted in a simlarly rapid rise in the demand for oil, both industrial and transport uses.

The Oraganization of Petroleum Exporting Countries (OPEC) is a trading group set up to represent 13 countries, mainly in the middle east, in which over half of the worlds oil reserves are located. In the 1970s, OPEC has great power because it controlled 90% of the worlds crude oil exports. Acting as a cartel, OPEC was able to introduce quotas in order to control oil prices and as a result prices rocketed, sending developed countries into economic recession. Its influence has since been reduced as the high price of oil has allowed more expensive fields, such as those in the North Sea and Alaska, to be brought into production. However, most of the worlds recoverable reserves still lie in OPEC countries and trade in oil is predominatly between these countries, North America, Europe and China. Oil is transported by pipeline across short distances or by ocean-going tankers over long distances. The transportation of oil has huge potential environmental problems.

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Oil continued...

In the early parts of the 21st century there have been some significant trends in oil production and consumption. These are reflected in the rapid rise in oil prices that took place during 2005, accompanied by fears of political instability, risks of pollution and threats to security of the industry around the world.

In oil-importing countries, rises in the price of oil and therefore energy can have a damaging economic impact. Higher fuel prices can cause unwelcome rises in inflation and restrict economic growth, and are unpopular with voters. Major oil exporters are divided between those such as Saudi Arabia and Kuwait, which favour increasing output in an attempt to ease prices, and those such as Venezuela, which argue against conciliatory moves towards the big consumers, especially the USA.

In simple terms, global economic expansion is driving up the price of oil. There is a higher than expected demand in industrilaised countries and China's rapidly expanding economy has created a huge boost in demand, increasing at 20% per year. In the USA, demand has also risen. This is because of strenghtening economic recovery and a greater need for higher grade crude oil suitable for processing into pertrol for fuel hungry sport utility vehicles. These are popular with US drivers, a phenomenon that is spreading to consumers in western Europe. Only Saudi Arabia has the capacity to respond to this increase.

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There are, however, other factors than increased demand that have influenced the rise in price of oil:

  • In recent years, oil companies have tried to become more efficient and to operate with lower stocks of crude oil than previously. This means there is les of a cushion against interruptions in supply.
  • Terrorist threats in the middle east from militants inspired by Al-Qaeda, ethnic tensions in Nigeria and strikes in Venezuela have all affected prices.
  • In Saudi Arabia and Iraq, sobotage attacks on oil facilities have had a limited impact on supplies. However, they have raised questions over the long-term stability of the area. Any substantial attacks on Saudi Arabian oil facilities would have a majoe impact on global oil markets.
  • OPEC accounts for 50% of the worlds crude oil exports. It attempts to keep prices roughly where it wants them by reducing or increasing supplies to the market, thereby preventing a fall in either price or demand.
  • The actions of analysts and speculators have had a significant effect. Analysts in some major oil companies have made incorrect forecasts of demand, thereby lowering output. Speculators on the worlds stock markets have exacerbated price pressures.
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Natural gas

Natural gas accounts for almost a quater of the worlds total energy consumption, and this consumption has increased considerably over the past 30 years. The USA consumed 27.2% of total nautral gas in 2005, followed by the Russian Federation with 25.7%. Europe consumed 19.1%, so these 3 industrialised regions accounted for some three-quaters of global consumption. It is likely that there will be continued increases in demand for this source of energy over the next 20years, and the largest increments in future gas use are likely to be in developing countries.

Depsite its importance only 26.3% of the marketed natural gas in 2005 was internationally traded. The low share of international trade is due to high transportation costs. Natural gas in complex to transport and require enormous investment. Liquefied natural gas tankers accounted for most internationally traded gas but a small proportion was transported by pipeline. The construction and management of pipelines is not only expensive but it also poses legal, logistical and environmental problems. The main exporting countries by pipeline in 2000 where the Russian Federation, Canada, Norway, the Netherlands, Algeria and the UK. The main importing area by pipeline - apart from the USA, which tool all of Canada's exports - was Europe.

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Coal remains a major fuel resource used for generating electricity worldwide. For example 92% of the total electricity generated in Poland and South Africa comes from coal, 78% in China and 50% in the USA. Coal is used to generate almost 40% of the worlds electricty.

There has been a marked change in the pattern of coal consumption and trade over the past 30 years. The three most important producer: China, the USA and Russian - are still in lead position but Australia and South Africa in the southern hemisphere,m and Indonesia (a developing country), have grown in importance. In these locations coal is relatively cheap and easy to mine using modern methods of production. The coal industry in many European countries, particulary in the UK and Germany, suffered decline largely asa result of domestically produced coal becoming more expensive than that imported from abroad.

The future use of coal in the electricity market is closely linked to the availability of oil and natural gas. If prices of these commodities continue to rise unchecked as supply diminishes, it is possible that use of coal for electricity generation in the UK will increase.

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Nuclear power is predominantly associated with the advanced industrial nations of the world, and its possible expansion as a source of electricty in these nations is a mjaor debate in the early years of the 21st century.

In the 1960s and 1970s nuclear power generation increased tenfold. The USA assumed dominace and other important producers were the UK, Japan, Germany, France, Canada, Sweden, Russia and Belgium. In recent decades less developed countries such as India, China and South Korea have also developed thier nuclear power industry. Nuclear power lost support in more developed countries following major accidents in 1979 at Two Mile Island (USA) and in 1986 at Chenobyl (Ukraine).

On a global scale the nuclear furture does not appear promising. Nuclear power accounts for 16% of worldwide-electricity generation and in 2006 output rose by 1.4% but by 2020 that contribution is expected to decline to just 10%.

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