Global Energy Growth
BP recently released their highly respected annual Statistical Review of World Energy for 2011. Most of the news stories on the report have focused on the exceptionally strong growth in global energy consumption. While that is without a doubt a major story that I will discuss here, I also want to highlight some lesser known facts from the report.
The report notes that overall energy consumption growth was 5.6%, the highest rate since 1973. Oil prices averaged the second highest level on record, and therefore oil showed the slowest growth rate at 3.1%, to reach a new record level of 87.4 million b/d. (I am on record as stating that I think global oil production – actually total liquids production – will peak in the region of 90 million barrels per day).
Oil production in the U.S. increased for the second year in a row, and is up 11.6% since 2008. Note that this is not a trend I expect to continue, albeit I expect this fact to play a starring role in Barack Obama’s reelection campaign. I think it is going to be somewhat hard for his political opponents to gain traction with accusations that President Obama is blocking domestic oil production given the increased production since he took office. (I am not suggesting that there is no merit at all to the claims; rather I am simply pointing out how I see this playing out).
Many people may not realize that the U.S. is the third largest oil producer in the world, with 8.7% of total global oil production. The U.S. trails only Russia (12.9%) and Saudi Arabia (12.0%).
Natural Gas & Coal
Natural gas and coal prices varied, but for the most part showed strong divergence from oil prices (and much lower prices per unit of energy than oil prices). As a result, growth in natural gas was 7.4%, the largest growth rate in more than 25 years (and a trend I expect to continue for a few years). The largest global consumption increase occurred in the U.S. (+21.7%), where shale gas kept natural gas prices low relative to oil prices.
Coal consumption increased by 7.6% in 2010, the highest growth rate since 2003. Coal’s percentage of global energy consumption also increased to 29.6%, versus 25.6% 10 years ago. China consumes nearly half of the world’s coal (48.2%) and accounted for almost 2/3rds of global coal consumption growth.
The U.S. had 24.7% of total global renewable energy consumption. China had the highest growth rate of renewable energy among large countries at 74.5%.
Biofuels production globally increased by 13.8%, led by the U.S. at 17% and Brazil at 11.5%. Renewable energy for power generation increased by 15.5%, led by wind power with an increase of 22.7%.
Hydropower consumption grew by 5.3% in 2010, breaking the previous consumption record. A sampling of countries showing especially strong growth in hydropower were Mexico (+38.9%), Bulgaria (+59.4%), Greece (+29%), Portugal (+88.2%), Spain (+60.9%), Turkey (+44.3%), Iran (+47.2%), Australia (+29.8%), and South Korea (+32.9%).
China remains the top global producer of hydropower with 21% of the global total. Other countries having more than 5% of total global hydropower consumption were Brazil (11.6%), Canada (10.7%), and the U.S. (7.6%).
Global use of nuclear energy grew by 2%, a trend that I expect to reverse itself as a result of public backlash over the aftermath of Japan’s Fukushima Daiichi nuclear disaster. I also expect that as this happens, nations will fill a large portion of the capacity void with coal (as Germany is reportedly planning to do).
Energy consumption in China grew by 11.2%, and the report confirmed the IEA’s earlier report that China is now the world’s largest consumer of energy at 20.3% of global energy consumption. Still, China uses only one-tenth of the per capita oil consumption of the U.S., so there is plenty of room for their consumption to (attempt to) grow. This promises to keep strong pressure on energy prices for the foreseeable future.
Per Capita Energy Consumption
The U.S. is often singled out for its high energy consumption, but alas it is not in first place. Canada, Saudi Arabia, and Belgium all ranked ahead of the U.S. in per capita oil consumption. Belgium? Canada and Saudi Arabia I can understand, but I don’t understand why Belgium would consume more energy than the U.S. But if you look at BP’s per capita oil consumption map in the report, the U.S. is shown in the band of 2.25-3.0 tons of oil consumption per capita, while Canada, Saudi Arabia, and Belgium are all shown as consuming over 3.0 tons per capita.
For natural gas, a larger number of countries had per capita consumption ahead of the U.S., including Canada, Saudi Arabia, Russia, and the Netherlands.
Politicians in the U.S. have made a great deal of noise in the U.S. over falling refining capacity, often accusing oil companies of purposely withholding capacity to drive up profits. While it is undoubtedly true that unprofitable refineries in the U.S. are being shut down, (U.S. refining capacity fell by 0.5% in 2010), this trend is true throughout Western countries.
Refining capacity across Europe & Eurasia declined by 1.0% in 2010, which might lead one to conclude that there is more involved here than greedy U.S. oil companies. In fact, global refining capacity increased by 0.8% as refining operations shifted to areas with lower labor costs and more direct access to crude oil. Refining capacity in Africa, China, Iraq, and India respectively grew by 8.9%, 12.%, 6.8%, and 3.6%. I expect the loss of U.S. refining jobs to continue such that crude oil imports are slowly replaced by finished product imports.
There are three important takeaways for me from the current report. First is the fact that global energy consumption continues to rise rapidly even in the face of high prices. This trend is unlikely to reverse itself in the foreseeable future, assuring long-term upward pressure on energy prices. Due to the wide spread in the U.S. between natural gas and oil prices, I would also expect a continued shift toward using more natural gas as fuel for vehicles (especially fleet vehicles).
Second, the fact that China is now the world’s largest consumer of energy should not be taken lightly. Their interests are not necessarily the interests of the West, and yet they may soon be — if they are not already — considered the most important customer for global energy supplies. This will give them more leverage over global energy supplies, potentially at the expense of the West.
Finally, the global increase in fossil fuel consumption is the sort of observation that supports my prediction that the only thing that is going to stop carbon emissions from rising is for the world to actually start running out of fossil fuels. We can pass all the legislation we want, write about it, talk about, and urge action — but developing countries are still going to burn cheap energy and emit carbon dioxide. So it should not come as a surprise that global carbon emissions in 2010 rose at their fastest rate in over forty years. I will discuss this in more detail in the next essay, but I have a very pessimistic view that carbon emissions will be arrested as a result of voluntary actions.