06/22/2011 05:27 pm ET Updated Aug 22, 2011

BP Report Shows Economic Growth Still Dependent on Oil

The relationship between energy and global economic growth has never been more clear than in BP's World Energy Statistical Review for 2010. No sooner had the global economy shaken off the shackles from the last recession than energy demand exploded. It grew by more than 5.5% last year, the largest annual increase in more than 30 years.

Not surprisingly, oil played a center stage role in last year's spectacular increase in global energy demand. It is, after all, the world's single most important fuel, accounting for more than a third of all the global energy produced last year. What makes last year's global oil numbers particularly interesting is the fact world oil demand had fallen in the two previous years -- a victim to the global recession. They were the first annual declines in global annual oil consumption since 1983.

Unfortunately, no sooner had the global economy regained its footing, did it regain its enormous appetite for oil. Not only was all of the much-touted demand destruction during the last recession reversed but world oil consumption grew by over 3% in 2010. This established a year-end new consumption record of almost 87.5 million barrels a day.

What made the rebound even more impressive was the fact it happened amid the second highest oil prices on record. Brent averaged nearly $80 per barrel in 2010.

Whether world oil consumption will continue to grow and reach BP's forecast of a new pinnacle of more than 89 million barrels a day by the end of this year looks increasingly uncertain.

Notwithstanding Saudi's claim of being able to ramp production up to 10 million barrels per day, world crude supply hasn't even made up for the loss of Libyan oil production, let alone shown any capacity to accommodate another couple million barrels a day or so of global demand growth.

But global production may not need to grow by that much. As Congress and the Obama administration haggle over the size of the U.S. federal debt ceiling, vital fiscal stimulus in the world's largest oil-consuming economy is rapidly coming to a close. So too is monetary stimulus with the end of the U.S. Reserve Board's quantitative easing program.

In Europe, meanwhile, Greece teeters on the brink of default, an event that will likely trigger similar defaults among fellow fiscal reprobates: Portugal, Ireland and, possibly, Spain. The Chinese economy, the world's second largest oil-guzzling and largest overall energy consuming economy, faces the prospects of huge power blackouts this summer that could exact a sizable toll on its economic growth.

The good news about the pending global economic slowdown is we may soon be burning less oil again in the second half of the year. But the bad news contained in BP's recent energy review is global economic growth remains as oil dependent as ever.