Japan and India are also large oil importers and stand out as potential beneficiaries. Interestingly, these two countries are also on very different trajectories. India, with approximately 1.3 billion people, is second only to China (1.35 billion) in population, though India’s population is growing faster, with a growth rate in 2014 of 1.2%, versus 0.5% for China.[2] Although India is the fourth largest user of energy and importer of oil, per capita energy use is very low, with India’s per capita use approximately one-tenth that of the U.S. and less than one-third that of China. Approximately 22% of India’s energy consumption was from oil,[3] but an equal percentage came from traditional biomass (such as burning wood, charcoal, or agricultural residue for cooking or heating), as nearly 20% of the population lacks access to electricity.[4]

India’s economic growth has been strong in recent years. In 2015, India—with an official gross domestic product (GDP) growth rate of 7.5%—actually surpassed China’s 6.9% growth, making it the world’s fastest growing economy for the year. As India’s infrastructure develops (electric and transportation), energy use per capita is likely to rise. In other words, although India is already a big beneficiary now, it could see even more positive effects in the future, and continue to reap the benefits should oil prices remain low.

Japan, though it has a much smaller population (approximately 127 million), is more developed; energy usage per capita is about six times higher than India, though still about half that of the U.S. However, Japan, given its shrinking population and slower economic growth, isn’t likely to see energy consumption increase as quickly in the future. On a relative basis, Japan has a higher dependency on petroleum, with approximately 44% of total energy usage coming from petroleum products,[5] meaning the per capita impact of lower oil prices will be much higher in Japan in the near term. Combined with fiscal and monetary stimulus, the Japanese economy may benefit from this additional support.

Japan also stands out in another area—it imports nearly all of the energy it consumes.  The U.S. and China imported 16% and 13%, respectively, of their total energy needs in 2012. However, Japan imported 94%, and another Asian country, Singapore, imported 98%. While Singapore may not make the top 10 oil importers on an absolute basis, its position as the 13th largest importer of oil versus its status as the 36th largest economy in the world shows that it is likely to feel a stronger benefit from low oil prices on a relative basis.

CONCLUSION

Outside of a significant surprise, such as cut in supply from OPEC or a pickup in economic growth that leads to additional demand, low oil prices may linger in the near term. Additionally, long-term factors, such as increased conservation and alternative energy, may keep oil prices low relative to recent years, which may mean that $100 oil, not the current price, will be considered the anomaly in the future. This would be a headwind for the energy industry and oil-exporting countries; however, consumers overall are benefiting from lower prices, as are the sectors and industries of the market more exposed to increasing consumer disposable income. Large oil-importing countries, including India and Japan, may also benefit from the tailwind of lower oil prices for longer.

[1] According to the annual consumer expenditure survey from the Bureau of Labor Statistics (BLS).

[2] According to World Bank data.

[3] According to Energy Information Administration (EIA) data.

[4] According to World Bank data.