'Oil-less' economic growth is coming

The trend towards better fuel economy for cars and other vehicles has been clear for some time and it is no surprise that developed economies are using less oil for power generation.

But data from the IEA shows it is not just the richer parts of the world that are weaning themselves off oil.

Although fuel intensity in the developed countries of the Organization for Economic Co-operation and Development (OECD) has consistently been far lower than in non-OECD countries, the rate of decline has been very similar, IEA figures show.

The top energy forecasters, the IEA, the U.S. Energy Information Administration (EIA) and the Organization of the Petroleum Exporting Countries all make different assumptions of oil demand, economic growth and the ratio between them.

The IEA says 1 percent of global economic growth now needs about 0.47 percent more oil, the EIA says it needs 0.51 percent, while OPEC suggests it needs only about 0.31 percent more oil.

The lower OPEC estimate may reflect a policy bias, analysts say, since the 12-country grouping represents oil producers who take a cautious, conservative approach to demand for their oil.

A Deutsche Bank analysis of oil intensity shows over the last 30 years the annual percentage change in oil demand has equaled 0.9 percent of global economic growth minus 2 percentage points.

But all the big forecasters expect the decline in oil intensity to pick up speed over the next decade.

The trend in the biggest oil consumer, the United States, is relatively easy to assess. Mary Novak, director of energy services at Global Insight, which provides the EIA estimates for oil demand growth, says jobs and income are the key indicators.

“We have based our model on jobs ... Oil is a transport fuel (in the United States). It is not used for much more,” she said.

In non-OECD countries, including China, it is more difficult to estimate since detailed oil data is not available. But it is becoming clear that oil intensity is declining everywhere.

“This is the market at work,” said Mike Wittner, global head of oil research at Societe Generale.

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