Oil Market

Most people understand that the oil industry is fairly massive, given how big a role it plays in transporting people and products around the world as well as the constant attention oil prices receive from economists. But many Americans might be surprised by the true scale of the industry, in terms of how much oil actually gets consumed and the sector’s size compared to other businesses.

Fueling Transportation

Plenty of Americans use oil to heat their homes and people rely every day on consumer products made of plastic and other petroleum-based materials, but for most people oil means the price of gasoline. For once, the common conception is actually fairly accurate.

According to the U.S. Energy Information Administration, the U.S. consumed enough petroleum to produce 36 quadrillion British thermal units (Btu) in 2010, or around 37 percent of the country’s total energy consumption. Of that amount, 22 percent went to industrial purposes, 5 percent to the residential and commercial sectors and only 1 percent to electricity generation. The remaining 71 percent was used exclusively for transportation, accounting for 94 percent of the sector’s energy usage.

Given that transportation represents 28 percent of the country’s energy consumption, dominating that sector easily makes up for its small role in other parts of the economy.

The picture is much the same on the global state. The International Energy Agency reports that oil accounted for nearly 96 percent of the world’s transportation needs, with the next largest portion going to non-energy uses.

Scope of the Market

The size of a company can be determined in a few ways, but two prominent choices are market capitalization – how much people value a company – and revenue – how much they actually make. As of June 2012, Apple dominated the first measure, with a valuation upward of $540 billion, followed up by the largest publicly traded oil company, ExxonMobil, at just under $400 billion. In terms of revenue, however, the energy firm blows Apple out of the water, earning more than $486 billion in 2011, compared to Apple’s $108 billion.

While this should drive home the present value of the oil industry, it fails to capture the sheer scale of its operations. In 2011, the EIA reports that the U.S. consumed more than 18.8 million barrels of oil per day. Before the financial crisis in 2008, that number reached even higher to around 20.7 million barrels per day.

And though the U.S. is the single largest consumer of oil in the world, the global market dwarfs even that massive demand, using just under 88 million barrels of oil per day. That number dipped briefly in 2008 and 2009, but has otherwise risen consistently for decades. The EIA projects that the number could rise as high as 93 million barrels per day by 2015 and potentially as much as 112 million barrels in 2035, as emerging economies in Asia begin to see their demand expand at a dramatic pace.

While demand is expected to grow dramatically in the coming years, the report also suggests that production will continue to rise. Much of this rise will come from members of the Organization of Petroleum Exporting Countries, but there are also major possibilities for investing in oil outside of the oil-producing cartel. Where OPEC production will need to increase from around 35 million barrels per day in 2008 to nearly 47 million barrels per day in 2035, other countries will see their output grow even faster from 50 million barrels to more than 65 million barrels.

Many of these opportunities will come from unconventional sources like the recent shale oil boom in North Dakota, but conventional production will also rise more than 15 percent in the next quarter-century.