Oil demand rising, but boom days gone: Expert

Oil demand rising, but boom days gone: Expert

LONDON (Reuters): World oil demand growth will pick up this
year as Asia's battered but energy-hungry economies start to
recover, BP Amoco's chief economist Peter Davies said on
Thursday.

However gains in the coming years will probably be slower than
during the early and mid-1990s when the world's need for oil grew
annually by about two million barrels per day (bpd), he said.

"World oil demand is increasing again," Davies told the annual
conference of the Center for Global Energy Studies.

"Asia has bottomed out and a partial recovery (in economic
growth) has begun," he said. "Oil demand in total will probably
accelerate."

He said that global economic growth would probably slow
further this year to around 1.5 percent from 1.8 percent in 1998
and around 3.5 percent annually in the mid-1990s.

But the projected 1999 slowdown masked a change in the
regional composition of global growth that showed sharper
increases in growth in the convalescent economies of Asia.

Since Asia normally supplies almost half of global oil demand
growth, the growth in gross domestic product growth in Asia would
have a disproportionate effect in global oil demand growth.

Asian emerging economies apart from China account for 12
percent of world demand but only six percent of world gross
domestic product, he said.

Davies said that as a result, global demand was expected to
grow by around 800,000 bpd in 1999 following a rise of just
300,000 bpd in 1998.

Davies cautioned however that there was unlikely to be a
dramatic rebound in oil demand in the coming years of the kind
seen following the price crash of 1986.

"We aren't going to see a strong bounce back," he said. "Will
demand come back to its trend level? -- Probably not."

This was because there would be much less switching back into
oil from other fuels because other sources of energy such as gas
had become much cheaper.

In addition, Asian economic growth would be much slower,
despite continuing population growth and the high energy
intensity of Asian economies.

Davies questioned what he said was the "business as usual"
consensus forecast of the International Energy Agency, the U.S.
Department of Energy and several consultants that oil demand
would average around two percent per year between 2000-2010.

He said it was likely that long-term oil demand growth would
be offset by other factors including the growth of solar power
and the adoption of fuel cell technology in transport.

"The long term trend rate will be tempered by these forces,"
he said.