Petroleum demand shows decline of the World's Factory

Although forecasts of energy demand in OECD member countries are being revised downward due to the debit crisis in Europe and the unclear expectations for the U.S. economic recovery, many people are still optimistic for the growth of petroleum demand in emerging countries.

Especially, China is expected to contribute to nearly half of the global growth of petroleum consumption in the next few years. However, recent indicators suggest that the situation is not so optimistic like people anticipate.

The following chart shows year-on-year growth of industrial production and crude oil inputs of the U.S. and China.

The growth of the U.S. industrial production had peaked out in mid-2010 and crude oil inputs in 2011 frequently decreased year-on-year. Can we believe the continuous U.S. economic recovery that FRB says, despite the sluggish energy use?

Chinese economy is deeply affected by the U.S. which is the largest trading partner of China.
China's growth of crude oil inputs is roughly following that in the U.S. with about 3-months delay.

The growth of U.S. crude oil inputs rebounded during August and October 2011, but dipped in December.
Recovered Chinese crude oil inputs in November seemed to follow U.S., then the Asian giant's crude oil inputs may decrease after March 2012 affected by the latest U.S. activities.

Meanwhile, the growth of Chinese crude oil inputs in a downtrend throughout 2011 also generates worries.

The growth of ethylene production in China clearly showed slowdown in 2011. It even posted year-on-year decrease during August and October. Ethylene is a main ingredient for plastics and chemical fibres.

China has been expanding exports of electric appliances and clothing. The slump of plastic output in China coincides with recent media reports that many Chinese factories are closing.

China's monthly export amount seems to be extending favorably, but the amount in November 2011 failed to exceed the July figure because of the Euro zone debit crisis. China's export amounts towards the end of year usually exceed July-September figures except for 2008 when the Lehman shock depressed global economy seriously in the later half of the year.

If the growth of Chinese petroleum consumption in 2012 shrinks to the flat level or below the previous year level, the year's global growth rate of petroleum demand from 2011 might be less than half of the current forecasts at about 1.2-1.3 million barrels per day.
Chinese decline also reduces petroleum demand in other nations like Japan that supply raw materials and machinery to China.