One way to predict the future price of oil is to consider how many companies and countries are aggressively pursuing new reserves. China has closed deals around the world in crude-rich regions including Venezuela, Brazil, off-shore Africa, and the Middle East. Exxon Mobil (NYSE:XOM) has publicly stated it will press to increase it exploration effort.
Most oil analysts expect the demand for oil to tick up modestly this year compared to last and have set oil price targets between $70 and $80. Some experts believe that prices will go higher as large economies, especially China, move back to rapid GDP growth.
India, the second-largest developing economy which is expected to grow at 7% or 8% this year based on GDP, has been relatively quiet about its crude needs. But, that is changing rapidly. The Wall Street Journal reports that “India wants to join the club of global energy giants.” The paper used the effort by India’s Reliance Energy to buy refiner LyondellBasell as an example. The Journal also points out that India imports 70% of its oil at a price of $90 billion per annum.
According to the CIA Factbook, India’s GDP was $3.5 trillion last year and had grown at an average of over 8% during the last three years. The nation has a population of almost 1.2 billion, second only to China. According to Forbes, 45 of the world’s 2,000 largest companies in the world are in India. China has 84. As India continues to grow, the number of large industrial firms it has is likely to rise, increasing the need for fuel and petrochemicals.
India will also need more fuel as a large part of its population is lifted out of poverty. These people will often move into housing built with modern heating. India also has a primitive road infrastructure throughout much of the country, making them impassible by car. The need for autos and the ability to use them will only increase along with income and improved roads.
India is usually not mentioned in the same breath as China when the conversation turns to energy needs. That is changing rapidly.
Douglas A. McIntyre
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