beyondbrics

By Valentina Romei and Stefan Wagstyl

With Brent oil around 115$ per barrel and expected to rise further in the light of the unrest in the Middle East, it is worth considering who will be squeezed hardest among the countries of the emerging world.

China and India are the two largest net oil importers in emerging markets. But both are big consumers of coal and rely less on oil than some of their rivals. Chile and Thailand depend far more on imported oil. As the chart below the fold shows, the level of oil dependency is relates to the energy mix which varies a lot between countries. As in so many sectors, policy matters.

The chart illustrates energy supply by fuel for key countries and regions. Latin America is relies more on oil than any region after the Middle East. About half of its total energy consumption comes from oil and the remaining half is largely composed of gas.

 The region as a whole is a net exporter of oil and shortages of supply in the Middle East are likely to benefit domestic oil producers. But there is a world of a difference between oil-rich Venezuela and Chile, which  is likely to be among the most affected state in Latin America by the rise in oil price. It is one of the few net oil importers and it depends on oil for almost two thirds of its energy supply. Most of Chile’s  oil comes from other Latin American countries and the US, not from the Middle East, but that will not save it from rising prices as oil is a globally-traded commodity.

Brazil – which has became a net oil exporter in the last decade – has a much larger proportion of its energy coming from renewables than the region as whole – nearly half, if hydro is included. 

The industrialised countries are in a much more vulnerable position as they are net oil importers and depend on oil ijmports for around two fifths of their total energy supply, with a marginal proportion coming from renewable energies. Spain and Italy appear to be particularly exposed to oil prices shocks as they are among the world top 10 oil importers and they rely on oil for almost half their energy supply.

By contrast, in Asia oil does not reach even one third of total energy consumption, with a large part coming from renewables and gas. Regional variations are significant. India and China rely on oil for barely more than a fifth of their energy supply and are cushioned from oil price spikes by having exceptionally high proportions of their energy coming from coal.

 China, the second world largest oil net importer after the US, has increased its oil energy consumption since 2000, but at a much slower pace than the consumption of energy from coal, which more than doubled, or gas, which in 2008 was three times higher than at the start of the decade (growing from a low base). China has therefore reduced its dependence on oil in teh past 10 years.

 India – which ranks 5^th in the world top net oil importer – differs from China in that it has a larger proportion of energy coming from combustible renewables and waste, making it less reliant on coal then China. Indian reliance on oil has remained stable in the last decade, and it has increased dependence on coal.

Oil dependence is limited in many other Asian emerging countries including Indonesia, Bangladesh, Philippines and Vietnam. All of them rely on oil for a proportion that varies from a marginal share in Bangladesh to about one third in the Philippines. All of them seem safely protected from oil price changes by a proportion of renewable energy that accounts for 31 per cent to 42 per cent of their energy supply. 

Thailand is the big exception. With a limited energy mix,  it relies on oil for about 40 per cent of its energy supply and on gas for another 30 per cent. The country is the 14th biggest world net oil importer which makes Thailand pretty much as vulnerable to oil price shocks as developed countries.

Related reading
Middle East in depth, FT
Guest Post: Will oil cause a hard landing, beyondbrics
Turkey’s oil price fears, beyondbrics
What about a revolution in oil dependency, Haaretz
Oil market report, IEA