Petroleum

Today petroleum is the basic inputs of the social life and production sector since it has been used for transportation, heating, industry, energy and housing. The word petroleum is formed by the association of the latin Petra (means rock, stone) and oleum (oil) words.

36 Although it has been used since the ancient age, the first commercial usage of the oil started in middle of the 19^th century, when the oil was discovered in Pennsylvania in 1859.

(Özsabuncuoğlu ve Uğur, 2005:179).

While the share of oil among the primary energy demand was 48 % in 1970s, it has been decreasing steadily. 33.1 % of the world energy needs was met by oil as of 2013. Despite the increase in the amount of oil used, the share of oil in the primary energy supply is expected to fall to 27 % in 2035 with the help of the renewable energy investment.

While the demand of oil is relatively stable in developed countries, it has been increasing rapidly in developing countries especially in China and India. The expected demand increase of oil is 0.8 % for OECD countries and 2.7 % for non-OECD in 20 years. As a result, between the 2002-2030 periods the demand of petroleum will rise 39 % at the non-OECD countries (WEC, 2013).

Among the all factors, the economic growth is the most effective one that accelerate the oil demand in the world. According to the International Energy Agency forecast, the average annual growth rate of world economy will be 3 % between the 2002-2030 time periods.

Under this growth assumption, it is estimated that the global demand of oil will rise at about 1.6 % annually and the daily oil demand will reach 121.3 million barrel/day in 2030 (IEA, 2004; WEC, 2013).

Table 4: Oil Demand by Region (MTEP)

2002 2010 2020 2030 2002-2030

OECD 45.4 49.7 54.4 57.1 0.8

OECD North America 22.6 25.5 28.7 31.0 1.1

USA and Canada 20.7 23.2 25.8 27.6 1.0

Non-OECD countries 28.6 37.5 48.8 60.4 2.7

China 5.2 7.9 10.6 13.3 3.4

India 2.5 3.4 4.5 5.6 2.9

Other Asia countries 3.9 5.1 7.0 8.8 3.0

Latin America 4.5 5.4 6.8 8.4 2.3

Africa 2.4 3.1 4.4 6.1 3.4

Middle East 4.3 5.4 6.8 7.8 2.1

European Union 13.6 14.4 15.3 15.6 0.5

World 77.0 90.4 106.7 121.3 1.6

Resource: World Energy Outlook, (IEA, 2004 and WEC, 2013)

37 At the global level, the most important reason of the oil demand comes from transportation sector. Today, nearly 52 % of the oil demand comes from the transportation sector, 6 % from electricity and 30 % from the industry. According to the IEA data, while the share of transportation at the oil demand was 33 % in 1971, it is estimated that this ratio will reach to 54 % in 2030. However the share of electricity produced from oil is expected to fall to 3

% and the usage of industry will rise to 32 % by the year 2035 (IEA, 2004:84, WEC,2013).

According to the World Energy Council report, compared to 2012, the world oil reserves were increased 0.8 % in 2013 and reached to the 1.669 billion barrel (235.8 billion tons) (WEC, 2013, IEA, 2013). Since the beginning of the 2000s, the oil reserves increased at about 30 % in the world. More than 30 % of the reserve increase comes from the new reserve but rest of them from revisions of the reserves by oil exporter countries, especially in OPEC. OPEC countries have nearly 70 % of total proven reserves in the world. Outside the OPEC members, Kazakhstan and Russia have significant oil reserves and they increased their reserve since 2000.

While the Saudi Arabian Peninsula was known as the biggest reserve area until recently, the share of it has been decreasing in the total oil reserves with the new reserve discovery in the world. Today Venezuela is the leading country for proven oil reserves that it has overtaken Saudi Arabia with the discovery of the Orinoco Belt reserves in 2010 (IEA, 2012: 97). Today, nearly half of the oil reserves are located at Middle East region. Saudi Arabian, Iran, Iraq Kuwait, United Emirates and Qatar are the main producers in this region. As of 2013, the oil reserves and their ratio are shown in the figure 1:

Figure 1: Distribution of the Oil Reserves in the World (billion barrels)

Middle East Mid&South N. America Europe & Africa Asia Pacific America Euroasia

Resource: BP Statistical Review of World Energy, June 2013

38 One of the most notable events on the supply side of oil was the shale gas revolution of America. With the development of the horizontal well technology, the USA began to produce oil from shale rock. In 2012, USA recorded the highest oil and gas production of its history. While the USA was the biggest importer of oil until the shale gas revolution, it is estimated that by the end of 2016, it will be one of the oil exporter countries in the world. This development changed rules of the oil and energy game in the world and decreased the dependency of USA to the Middle East oil reserves. It is expected that by the year 2030, rock oil-gas takes the 5^th place in the total energy supply and USA, Saudi Arabian and Russia will meet the 1/3 of the world oil supply. With the current demand and consumption level, the life of oil reserves was estimated as 53 years (WEC, 2013).

The price of oil has been fluctuating since the discovery date of it. The price of oil can be used as a weapon by the producers like being in Arab-Israel war. Economic growth, political decision of OPEC, supply demand equilibrium and instability in the supplier countries can easily jump the price of it (WEC, 2013).