Oil: Shocking how vital it still is

A general view of the Bashneft-Ufaneftekhim oil refinery outside Ufa, Bashkortostan, Russia Image copyright Reuters

Today the BBC has launched its Big Oil Drop project, a series of interconnected online articles and data packages, alongside broadcast pieces.

The idea is a pretty simple one. Every now and again - amid all the swirling reports and breaking news - it is worth taking a pause and bringing together what we know about the most important resource in the world.

As part of the Big Oil Drop project, I was asked a straightforward question. "Why is oil so important? And could you write about it."

It was so straightforward a question that it sounded faintly ridiculous.

Well, of course oil is important, I blustered, erm, we need it to drive in our millions of cars, jobs depend on it, the supply of energy is at the heart of much of global politics (just look at Russia now), wars are fought over it, without oil the lights would go out...

I tailed off, realising that yes, of course, I knew oil was important. But quite how important slightly eluded me.

And so I started digging around for some facts. And only when you start doing that does the hugeness of its influence on the global economy become clear.

Ryan Carlyle, the US engineer, wrote in Forbes about why oil is vital. "You can't move anything, anywhere faster than about 25mph without oil," he said.

"You can't operate a modern military, and you can't run a modern economy. There is no doubt in my mind whatsoever that modern civilisation would collapse in a matter of months if oil stopped flowing.

"Oil is about as important to the developed world as agriculture."

Oil and food (and let's include water in that, to avoid argument) are the two most important resources on the planet.

The United States consumes 19 million barrels of oil a day. A barrel of oil is about a bath's worth.

China consumes 10.3 million, Japan 4.5 million and the UK 1.5 million.

Every day, the world consumes 91.2 million barrels of oil, according to the US Energy Information Administration.

That's a lot of bathfuls.

And that consumption figure will go up, not down.

Every week, 1.5 million people are added to the world's urban population. And that tends to add to our consumption of oil as societies move from an agrarian economy to a consumption and manufacturing economy.

The growth of the "emerging seven" countries (China, India, Brazil, Russia, Indonesia, Mexico and Turkey) will only add to this upward pressure on demand.

As a recent report from the accountants PwC revealed, emerging economies, most notably China and other fast-growing Asian economies, account for nearly half of all infrastructure spending (that's the development of cities and factories, in the main).

That's up more than 10% since 2006. And it all adds to oil demand.

Because the more we live in cities - and the more countries develop - the more we want cars to drive around in and lorries to deliver the goods we want to consume.

The global vehicle fleet (commercial vehicles and passenger cars) is predicted to more than double from about 1.2 billion now to 2.4 billion by 2035. Most of that growth - 88% - is in the developing world and nearly all of it - just under 90% - will be fuelled by oil.

Of course, there are alternatives to oil. And across the world, environmental targets and efficiency gains are having an impact.

But those developments are only slowing the increase in demand. They are nowhere significant enough to reverse it.

Look at cars. In the forecasts, transport demand for oil rises by about 30% by 2035, while the actual number of vehicles doubles.

But 30% is still a significant rise.

Renewable energy is replacing some of the world's appetite for oil.

A recent report by the Economist Intelligence Unit suggests that the growth of renewables will outpace the growth of oil and coal products in 2015.

You can read some interesting analysis of that report (and see an important graph) here.

But although the growth of renewable energy is rapid, it is from a very low base.

And it was put in perspective by Bob Dudley, the chief executive of BP.

"Fossil fuels [oil, gas and coal] are projected to provide the majority of the world's energy needs, meeting two-thirds of the increase in energy demand out to 2035," he said at the launch of the oil giant's Energy Outlook 2035.

"The strong growth of US tight oil [that's oil taken directly from rocks via the process of fracking] in recent years has had a dramatic impact, with oil increasingly flowing from West to East rather than East to West.

"This is likely to continue, with strong growth in China and India driving energy demand."

Peak oil - that is the theoretical moment when oil extraction will reach its height and inevitably decline - has been long predicted and never arrived.

In fact, you can go back to the 19th Century to hear predictions oil would run out during the "lives of young men".

More than 100 years later, we are still waiting.

Related Topics