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Energy & Financial Markets


An analysis of 7 factors that influence oil markets, with chart data updated monthly and quarterly

What drives crude oil prices: Demand OECD

The Organization of Economic Cooperation and Development (OECD) consists of the United States, much of Europe, and other industrialized countries. At 46 percent of world oil consumption in 2021, these large economies consume less oil than the non-OECD countries, and have low or declining oil consumption growth. Oil consumption in the OECD countries peaked in 2005, whereas non-OECD consumption rose more than 50 percent since then.

In OECD countries, price increases have coincided with lower
Updated: Monthly | Last Updated: 07/09/2024
In contrast to non-OECD countries, oil consumption in OECD countries fell from 2006-2009 after prices rose, and declined significantly during the economic downturn. Due in part to their relatively slower economic growth and more mature transportation sectors, the impact of prices on OECD consumption has been more evident than for non-OECD countries.

Structural conditions in each country's economy influence the relationships among oil prices, economic growth, and oil consumption. Developed countries tend to have higher vehicle ownership per capita. Because of this, oil use within the OECD transportation sector usually accounts for a larger share of total oil consumption than in non-OECD countries; it is also more mature and slower-growing. Economic conditions and policies that affect the transport of goods and people thus have a significant impact on total oil consumption in OECD countries. Many OECD countries have higher fuel taxes and policies to improve the fuel economy of new vehicles and increase the use of biofuels. This tends to slow the growth in oil consumption even in times of strong economic growth. Furthermore, the economies in OECD countries tend to have larger service sectors relative to manufacturing. As a result, strong economic growth in these countries may not have the same impact on oil consumption as it would in non-OECD countries.

OECD countries tend to have fewer subsidies on end-use prices, so changes in market oil prices are often quickly reflected in prices faced by consumers. However, it takes time for people to adjust their transportation routines and for the vehicle stock to turn over and become more energy-efficient in response to price changes.

Changes in expected future oil prices also affect consumers' decisions concerning modes of transportation and vehicle purchases. If prices are expected to remain high or increase in the future, more consumers may decide to purchase more fuel efficient vehicles or use public transportation. Decisions like these help to reduce future oil demand and would tend to moderate expected price increases.

Rising oil prices held down global oil consumption growth from 2005-2008 despite high economic growth
Updated: Monthly | Last Updated: 07/09/2024
In this chart, WTI price levels are graphed with changes in world GDP growth rates (as an indicator of underlying oil demand growth) and world oil consumption. Rising oil prices held down global oil consumption growth from 2005 to 2008, despite high economic growth.