Emerging markets could have an impact on oilfield production needs


Despite recent woes, China’s emergence may have a major affect on oil demand

As countries around the world implement new strategies to spur economic recovery, the effects on oil prices could be extreme.

According to an article in the Wall Street Journal, emerging markets – many of which have helped the global economy stay afloat these past four years – have taken over as the primary fuel price indicators. For example, in the 1970s, China accounted for only 7 percent of global oil demand growth. As of 2009, that number increased to 42 percent.

Liam Denning, the author of the article, suggests that the Organization for Economic Co-operation and Development (OECD) is losing its influence on oil demand as the market is becoming more based on emerging economy activity. However, as these markets continue to grow, it could create a problem concerning price fluctuation.

"China's rise fueled the marked shift upward in oil prices this past decade. But replacing the OECD with emerging markets as the barrel buyers of last resort creates problems of its own," Denning writes. "This shift has made oil demand, and therefore prices, more pro-cyclical. Instead of higher oil prices acting as a brake on economic growth and therefore keeping a lid on oil prices, higher oil prices can end up coinciding with, and even fueling, more demand."

One way to keep a lid on prices is to increase the efficiency in which oil is extracted from the ground and delivered. Oilfield producers can utilize a number of solutions such as artificial lift which can increase the rate in which oil is delivered, thus alleviating pricing concerns. Working with an oilfield technologies provider can help companies acquire the tools they need to ensure an efficient and safe extraction process.