Global Energy Demand to Increase by Thirty Percent

energy

By MarEx 2017-01-25 19:13:53

BP’s Energy Outlook predicts that global energy demand will increase by around 30 percent to 2035, driven by increasing prosperity in developing countries, partially offset by rapid gains in energy efficiency.

According to the newly-published 2017 edition, global demand for energy is expected to grow by an average of 1.3 percent per year. However, this growth in energy demand is significantly lower than the 3.4 percent per year rise expected in global GDP, reflecting improved energy efficiency driven by technology improvements and environmental concerns.

The Outlook looks at long-term energy trends and develops projections for world energy markets over the next two decades.

While non-fossil fuels are expected to account for half of the growth in energy supplies over the next 20 years, the Outlook projects that oil and gas, together with coal, will remain the main source of energy powering the world economy, accounting for more than 75 percent of total energy supply in 2035, compared with 86 percent in 2015. 

Oil

Oil demand is expected to grow at an average rate of 0.7 percent a year, although this is expected to slow gradually over the period. The transport sector continues to consume most of the world’s oil with its share of global demand remaining close to 60 percent in 2035. However, non-combusted use of oil, particularly in petrochemicals, takes over as the main source of growth for oil demand by the early 2030s. 

All of the demand growth for oil in the period to 2035 comes from emerging markets, with China accounting for half. 

“The possibility that the most important source of growth in oil demand in the 2030s won’t be to power cars or trucks or planes, but rather used as an input into other products, such as plastics and fabrics, is quite a change from the past,” said Spencer Dale, BP’s group chief economist.
 
Oil demand for cars is expected to increase by around four million barrels per day underpinned by a doubling in the global car fleet. The number of electric cars is assumed to increase from 1.2 million in 2015 to around 100 million in 2035 (around five percent of the global car fleet). 

“The impact of electric cars, together with other aspects of the mobility revolution, such as self-driving cars, car sharing and ride pooling, is one of the key uncertainties surrounding the long-term outlook for oil,” said Dale.

The slowing rate of oil demand growth is contrasted by the abundance of global oil resources.  The Energy Outlook speculates that the abundance of oil may cause low-cost producers, such as Middle East OPEC, Russia and the U.S., to use their competitive advantage to increase their market share at the expense of higher-cost producers. 

Gas

Gas is expected to grow more quickly than either oil or coal, with demand growing an average 1.6 percent a year. Its share of primary energy overtakes coal to be the second-largest fuel source by 2035. Shale gas production accounts for two-thirds of the increase in gas supplies, led by growth in the U.S. LNG growth, driven by increasing supplies in Australia and the U.S., is expected to lead to a globally integrated gas market anchored by U.S. gas prices. 

Gas’ continual gain on coal will be helped by energy policies that encourage the shift in both industry and power generation. The main growth comes from China, Middle East and the U.S. 

In China, growth in gas consumption is expected to outstrip domestic production, so that by 2035 imported gas comprises nearly 40 percent of total consumption, up from 30 percent in 2015. In Europe, the share of imports is expected to rise from around 50 percent in 2015 to over 80 percent by 2035. 

The Outlook expects LNG supplies to grow rapidly to account for over half of traded gas by 2035. This increase is led by supplies from the U.S., Australia and Africa. Around a third of this growth occurs over the next four years as series of projects currently under development come on-stream. 

Coal

Coal consumption is projected to peak in the mid-2020s, largely driven by China’s move towards cleaner, lower-carbon fuels. India is expected to be the largest growth market for coal, with its share of world coal demand doubling from around 10 percent in 2015 to 20 percent in 2035.

Renewables

Renewables are projected to be the fastest growing fuel source, growing at an average rate of 7.6 percent per year, quadrupling over the Outlook, driven by increasing competitiveness of both solar and wind. China is the largest source of growth for renewables over the next 20 years, adding more renewable power than the E.U. and U.S. combined.   

Carbon emissions
 
Carbon emissions are projected to grow at less than a third of the rate seen in the past 20 years, by an average of 0.6 percent per year versus 2.1 percent per year, reflecting gains in energy efficiency and the changing fuel mix. 

If achieved, it would be the slowest rate of emissions growth for any 20-year period since records began in 1965. However, carbon emissions from energy use in the base case are still projected to grow throughout the period, by about 13 percent. This is far in excess of the IEA’s 450 Scenario, which suggests that carbon emissions need to fall by around 30 percent by 2035 to have a good chance of achieving the goals set out in Paris. 

“The timing and form of government policy to encourage and facilitate the energy transition is important,” said Dudley. “In BP, we continue to believe that carbon pricing has an important part to play as it provides incentives for everyone - producers and consumers alike - to play their part.”

The Outlook is available here.