The annual BP Statistical Review of World Energy is an essential reference source. It gives production and consumption statistics for many countries and all the regions in the world, disaggregated by oil, gas, coal, nuclear energy and hydroelectricity.
The 2008 edition has just been published and is of the usual excellent standard. It shows that the world’s energy consumption (defined as primary energy) increased by 2.4% in 2007. That seems to me to have been a relatively moderate increase, because world economic output grew some 4.5%.
There were massive geographical variations, however. Demand in China increased by 7.7% and in India by 6.8%, reflecting their rapid economic growth. China now accounts for about 17% of the world’s energy consumption and should soon overtake the US (21%) as the world’s biggest consumer.
In contrast, consumption in the Europe and Eurasia region dropped 0.7%, despite economic growth of about 2.5%. The reason for that is obviously the impact of energy conservation and energy-efficiency policies biting in many EU member states.
UK consumption fell 3.8%, which is a surprisingly large reduction, at least to me. That was the third largest fall, after Denmark (6.9%) and Germany (5.6%).
BP groups the various countries into six regions, and there were also significant variations among them. The highest growth in consumption was in the Asia-Pacific region (5%), as would be expected because of China and India, followed closely by Africa (4.9%) and then South America (3.7%), Middle East (3%) and North America (1.6%). Only Europe fell.
The review shows that oil accounted for 36% of world energy consumption in 2007, coal 29%, natural gas 24%, hydro-power 6% and nuclear just under 6%. There have also been very different trends among these fuels.
World oil consumption increased just 1.1%, which was less than half the 2.4% rise in total energy consumption. Coal consumption grew 4.5%; gas 3.1%, and hydro 1.7%. Nuclear energy consumption fell 2%, but is likely to increase in the near future.
These differing trends are closely linked to relative prices. Oil&gas prices have risen massively, as we all know, and that must depress demand, although not necessarily in the short run. Coal prices are much lower. However, it can take time for some consumers, notably big electricity generators, to switch to coal from oil and/or gas.
In the UK in 2007, oil consumption fell 5%, coal 6.9% and nuclear 17.3%, whereas gas consumption increased 1.5% and hydro 2.1%. Some of these figures surprise me, particularly the big drop in coal consumption, which had actually increased in the previous two years. I need to do a little research on these changes to understand the reasons better.
Oil&gas prices have climbed during H1 2008 and, if prices remain high during the second half, I would expect relatively low demand growth rates for the year as a whole.
But oil&gas consumption will not fall worldwide because of demand in countries like China, but may do so in the UK and other places.
Growth in coal consumption should continue to be relatively high, and I also expect renewed growth in nuclear production and consumption. That may not happen in the UK in the short run, but Government is committed to building new nuclear power stations, although that could take at least a decade.
The BP review also gives some very interesting statistics on world oil production and consumption in 2007. I have argued on various occasions in this column that the high oil prices are not caused by a shortage of supply, but these statistics do not support my views.
World oil consumption rose by 1.1% in 2007, as mentioned above, but production actually fell by 0.2%, to an average of 81.5million barrels per day. There was a supply shortfall of 3.7million bpd.
That shortfall must have been met by a reduction in stocks. That can be sustained in the short run, but not for long. Indeed, there is pressure in the EU and elsewhere to build up oil stocks rather than deplete them. Even I may have to modify my opinions in the light of the statistical evidence.
Tony Mackay is MD of Mackay Consultants
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