1. The Continued Rise of China and India: Possible Implications for Global Oil Markets Jeff Brown Oil Industry & Markets Division International Energy Agency

2. Why Do We Care?

3. Incremental GrowthDrives the Market

4. Chinese Oil Imports

5. Global Demand Growth 2004/2005/2006 thousand barrels per day

6. Oil Demand Compared

7. Oil Demand Growth Compared

8. There is evidence that the movement of labour-intensive production overseas accelerated with emergence of China as a low-cost manufacturing base. This move has had an impact on oil demand: Chinese demand for marine bunkers increased 50% in 2004 Container traffic in key Chinese and US ports has boomed US Trucking Tonnage Index increased 5.7% in 2004 Key Trends: Rapid Growth in Trade-Related Oil Demand

9. Can China Continue on a High Growth Path? There are Precedents… In many ways Chinas recent take-off mirrors the Korea and Chinese Taipei demand growth of 1980-1997. In many ways Chinas recent take-off mirrors the Korea and Chinese Taipei demand growth of 1980-1997. Although Chinas 2000 per capita income (adjusted for purchasing power) is similar to Korea and Chinese Taipei in 1980, it consumes much less oil per capita than they did at the time. Although Chinas 2000 per capita income (adjusted for purchasing power) is similar to Korea and Chinese Taipei in 1980, it consumes much less oil per capita than they did at the time. GDP Growth (%) Oil Consumption Growth (%) Korea1980-977.48.7 Chinese Taipei 1980-977.54.3 China2000-048.58.4 Per Capita GDP (US$ PPP) Oil Consumption Per Capita (bbl/yr)Korea19802,3835.0 Chinese Taipei 19803,6808.0 China20003,8231.8

10. Korea Oil Demand Volatility Koreas oil demand was very volatile during its high growth years Koreas oil demand was very volatile during its high growth years Yet from a global perspective the impact was relatively minor (except for 1998) Yet from a global perspective the impact was relatively minor (except for 1998)

11. Chinese Taipei Oil Demand Volatility The situation is somewhat similar for Chinese Taipei The situation is somewhat similar for Chinese Taipei

12. Chinese Oil Demand Volatility Chinas recent growth experience is quite similar to Korea and Chinese Taipei Chinas recent growth experience is quite similar to Korea and Chinese Taipei However, due to its sheer size, Chinas impact on the global oil market is obviously much larger However, due to its sheer size, Chinas impact on the global oil market is obviously much larger

13. Global Implications of China/India as Growth Leaders? Potential for a rapid rise in oil demand, as often discussed. Potential for a rapid rise in oil demand, as often discussed. Likelihood of more volatile demand growth as Asian economies develop. Likelihood of more volatile demand growth as Asian economies develop. Depending on what happens on the supply side, increased price volatility. Depending on what happens on the supply side, increased price volatility.

14. State-run Companies Shifting Emphasis Overseas Both are pursuing overseas…India has often lost out

17. Feb 2004 President Hu visited Egypt, Gabon and Algeria. Feb 2004 President Hu visited Egypt, Gabon and Algeria. Investment agreements were signed with Egypt and Algeria and China started importing oil from Gabon. Investment agreements were signed with Egypt and Algeria and China started importing oil from Gabon.

18. Implications for Africa Good? Likely some benefits for oil exporters Likely some benefits for oil exporters Chinese and Indian companies…possibly overspending? Chinese and Indian companies…possibly overspending? Recent agreement to limit competition Recent agreement to limit competition Appear to have a lower investment hurdle than international oil companies Appear to have a lower investment hurdle than international oil companies More willing to go to risky/politically sensitive areas? More willing to go to risky/politically sensitive areas?Bad? Likely higher, more volatile prices with growing demand Likely higher, more volatile prices with growing demand

19. Thank You