[This record includes excerpts from the BP Statistical Review of World Energy signed by Bob Dudley, BP's Group Chief Executive, Released June 2019]
Mr. Dudley reports that the global primary energy consumption grew rapidly in 2018, led by natural gas and renewables. Nevertheless, carbon emissions rose at their highest rate for seven years.
Energy Developments:
Primary energy consumption grew at a rate of 2.9% last year, almost double its 10-year average of 1.5% per year, and the fastest since 2010.
By fuel, energy consumption growth was driven by natural gas, which contributed more than 40% of the increase. All fuels grew faster than their 10-year averages, apart from renewables, although renewables still accounted for the second largest increment to energy growth.
China, the US and India together accounted for more than two thirds of the global increase in energy demand, with US consumption expanding at its fastest rate for 30 years.
Carbon Emissions
Carbon emissions grew by 2.0%, the fastest growth for seven years.
Oil
The annual average oil price (Dated Brent) rose to $71.31 per barrel, up from $54.19/barrel in 2017.
Oil consumption grew by an above-average 1.4 million barrels per day (b/d), or 1.5%. China (680,000 b/d) and the US (500,000 b/d) were the largest contributors to growth.
Global oil production rose by 2.2 million b/d. Almost all of the net increase was accounted for by the US, with their growth in production (2.2 million b/d) a record for any country in any year. Elsewhere, production growth in Canada (410,000 b/d) and Saudi Arabia (390,000 b/d) was outweighed by declines in Venezuela
(-580,000 b/d) and Iran (-310,000 b/d).
Refinery throughput rose by 960,000 b/d, down from 1.5 million b/d in 2017. Nevertheless, average refinery utilization climbed to its highest level since 2007.
Natural Gas
Natural gas consumption rose by 195 billion cubic metres (bcm), or 5.3%, one of the fastest rates of growth since 1984.
Growth in gas consumption was driven mainly by the US (78 bcm), supported by China (43 bcm), Russia (23 bcm) and Iran (16 bcm).
Global natural gas production increased by 190 bcm, or 5.2%. Almost half of this came from the US (86 bcm), which (as with oil production) recorded the largest annual growth seen by any country in history. Russia (34 bcm), Iran (19 bcm) and Australia (17 bcm) were the next largest contributions to growth.
Growth in inter-regional natural gas trade was 39 bcm or 4.3%, more than double the 10-year average, driven largely by continuing rapid expansion in liquefied natural gas (LNG).
LNG supply growth came mainly from Australia (15 bcm), the US (11 bcm) and Russia (9 bcm). China accounted for around half of the increase in imports (21 bcm).
Coal
Coal consumption grew by 1.4%, double its 10-year average growth.
Consumption growth was led by India (36 mtoe) and China (16 mtoe). OECD demand fell to its lowest level since 1975.
Coal’s share in primary energy fell to 27.2%, its lowest in fifteen years.
Global coal production rose by 162 mtoe, or 4.3%. China (82 mtoe) and Indonesia (51 mtoe) provided the largest increments.
Renewables, Hydroelectric and Nuclear Power
Renewable power grew by 14.5%, slightly below its historical average, although its increase in energy terms (71 mtoe) was close to the record-breaking increase of 2017.
Solar generation grew by 30 mtoe, just below the increase in wind (32 mtoe), and provided more than 40% of renewables growth.
By country, China was again the largest contributor to renewables growth (32 mtoe), surpassing growth in the entire OECD (26 mtoe).
Hydroelectric generation increased by an above-average 3.1%, with European generation rebounding by 9.8% (12.9 mtoe), almost offsetting its steep decline in the previous year.
Nuclear generation rose by 2.4%, its fastest growth since 2010. China (10 mtoe) contributed almost three quarters of global growth, with Japan (5 mtoe) the second largest increase.
Electricity
Electricity generation rose by an above-average 3.7%, buoyed by China (which accounted for more than half of the growth), India and the US.
Renewables accounted for a third of the net increase in power generation, followed closely by coal (31%) and then natural gas (25%).
The share of renewables in power generation increased from 8.4% to 9.3%. Coal still accounted for the largest share of power generation at 38%.
Key Minerals
Cobalt and Lithium production rose by 13.9% and 17.6% respectively, both well in excess of their 10-year average growth rates.
Cobalt prices rose 30% to their highest levels since 2008, while Lithium carbonate prices increased by 21% to new highs. +2.9%
Growth of Global Primary Energy Consumption, the Fastest Growth Since 2010.
Energy Consumption.
Growth in Coal Demand (1.4%) also increased for the second consecutive year, following three years of declines.
Growth in Renewable Energy (14.5%) eased back slightly relative to past trends although remained by far the world’s fastest growing energy source.
In terms of why the growth in energy demand was so strong: a simple model provides a way of gauging the extent of the surprise in this year’s energy data. The model uses GDP growth and oil prices (as a proxy for energy prices) to predict primary energy growth at a country level and then aggregates to global energy. Although very simple, the framework is able to explain much of the broad contours in energy demand over the past 20 years or so.
This framework predicts that the growth in energy demand should have slowed a little last year, reflecting the slightly weaker economic backdrop and the strengthening in energy prices. Instead, energy demand picked up quite markedly. Digging into the data further, it seems that much of the surprising strength in energy consumption in 2018 may be related to weather effects. In particular, there was an unusually large number of hot and cold days across many of the world’s major demand centers last year, particularly in the US, China and Russia, with the increased demand for cooling and heating services helping to explain the strong growth in energy consumption in each of
these countries.
In the US, unusually, there was an increase in both heating and cooling days (as defined by the National Oceanic and Atmospheric Administration); in past years, high numbers of heating days have tended to coincide with low numbers of cooling days or vice versa. As a result, the increase in the combined number of US heating and cooling days last year was its highest since the 1950s, boosting US energy demand.
Energy in 2018: an Unsustainable Path
As discussed in previous Statistical Reviews, much of this weakness appears to stem from the pattern of Chinese economic growth during this period, in particular the pronounced weakness of some of China’s most energy-intensive sectors – iron, steel and cement – which account for around a quarter of China’s energy consumption and greatly dampened overall energy growth. At the time, I speculated that some of the slowing in these sectors reflected the structural re-balancing of the Chinese economy towards more consumer and service-facing sectors and so was likely to persist. But I also noted that the scale of the slowdown suggested that some of it was likely to be cyclical and would reverse over time. And indeed, that is what began to happen in iron and steel in 2017 and gathered pace last year.
If we adjust the framework to also take account of movements in these key Chinese industrial sectors, the over-prediction of energy growth in 2014-16 is greatly reduced, as is the remaining ‘unexplained’ strength of energy demand in 2018. So, in answer to the question of why energy demand was so strong in 2018: it appears that the strength was largely due to weather-related effects – especially in the US, China and Russia – together with a further unwinding of cyclical factors in China.
How does this growth in energy demand relate to the worrying acceleration in carbon emissions?
The Statistical Review of World Energy has been providing timely and objective energy data for the past 68 years. In addition to the raw data, the Statistical Review also provides a record of key energy developments and events through time. Mr. Dudley's guess is that when our successors look back at Statistical Reviews from around this period, they will observe a world in which there was growing societal awareness and demands for urgent action on climate change, but where the actual energy data continued to move stubbornly in the wrong direction.
A growing mismatch between hopes and reality. In that context, Mr. Dudley fears – or perhaps hopes – that 2018 will represent the year in which this mismatch peaked.
Key Features of 2018
The headline numbers are the rapid growth in energy demand and carbon emissions. Global primary energy grew by 2.9% in 2018 – the fastest growth seen since 2010. This occurred despite a backdrop of modest GDP growth and strengthening energy prices. At the same time, carbon emissions from energy use grew by 2.0%, again the fastest expansion for many years, with emissions increasing by around 0.6 gigatonnes. That’s roughly equivalent to the carbon emissions associated with increasing the number of passenger cars on the planet by a third.
What drove these increases in 2018? And how worried should we be? Starting first with energy consumption. As I said, energy demand grew by 2.9% last year. This growth was largely driven by China, US and India which together accounted for around two thirds of the growth. Relative to recent historical averages, the most striking growth was in the US, where energy consumption increased by a whopping 3.5%, the fastest growth seen for 30 years and in sharp contrast to the trend decline seen over the previous 10 years.
The strength in energy consumption was pretty much reflected across all the fuels, most of which grew more strongly than their historical averages. This acceleration was particularly pronounced in natural gas demand, which increased 5.3%, one of its strongest growth rates for over 30 years, accounting for almost 45% of the entire growth in global heating and cooling days for those countries for which data are available; this greatly reduces the extent of the surprise in last year’s energy growth. Once these weather effects are included, the growth in energy demand in 2018 still looks a little stronger than expected, but more striking is the surprising weakness of demand growth in the period 2014-16, which is far lower than the framework predicts.
To a very large extent, the growth in carbon emissions is simply a direct consequence of the increase in energy growth. Relative to the average of the previous five years, growth in energy demand was 1.5 percentage points higher in 2018 and the growth in carbon emissions was 1.4 percentage points higher. One led to the other as the improvement in the carbon intensity of the fuel mix was similar to its recent average. Finally, in terms of the headline data, what signal might the 2018 data contain
for the future?
Mr. Dudley thins this depends in large part on how you interpret the increasing number of heating and cooling days last year. If this was just random variation, we might expect weather effects in the future to revert to more normal levels, allowing the growth in energy demand and carbon emissions to fall back. On the other hand, if there is a link between the growing levels of carbon in the atmosphere and the types of weather patterns observed in 2018 this would raise the possibility of a worrying vicious cycle: increasing levels of carbon leading to more extreme weather patterns, which in turn trigger stronger growth in energy (and carbon emissions) as households and
businesses seek to offset their effects. There are many people better qualified than I to make judgments on this. But even if these weather effects are short lived, such that the growth in energy demand and carbon emissions slow over the next few years, the recent trends still feel very distant from the types of transition paths
consistent with meeting the Paris climate goals.
Hopes and Reality.
So, in that sense, there are grounds for us to be worried.
[Please read the full report by BP's Bob Dudley, Group Chief Executive, June 2019]
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