Energy demand grows 2.1 pct in 2017 – IEA report

Global energy demand grew by 2.1 per cent in 2017, according to IEA preliminary estimates, more than twice the growth rate in 2016, with oil and natural gas both seeing growth.

Global energy demand in 2017 reached an estimated 14 050 million tonnes of oil equivalent (Mtoe), compared with 10 035 Mtoe in 2000, International Energy Agency said in its new report Global Energy and CO2 Status Report, 2017.

Fossil-fuels met over 70 per cent of the growth in energy demand around the world. Natural gas demand increased the most, reaching a record share of 22 per cent in total energy demand. Renewables also grew strongly, making up around a quarter of global energy demand growth, while nuclear use accounted for the remainder of the growth. The overall share of fossil fuels in global energy demand in 2017 remained at 81 per cent, a level that has remained stable for more than three decades despite strong growth in renewables, IEA said.

“Improvements in global energy efficiency slowed down. The rate of decline in global energy intensity, defined as the energy consumed per unit of economic output, slowed to only 1.6 per cent in 2017, much lower than the 2.0 per cent improvement seen in 2016,” it said.

The growth in global energy demand was concentrated in Asia, with China and India together representing more than 40 per cent of the increase. Energy demand in all advanced economies contributed more than 20 per cent of global energy demand growth, although their share in total energy use continued to fall. Notable growth was also registered in Southeast Asia (which accounted for 8 per cent of global energy demand growth) and Africa (6 per cent), although per capita energy use in these regions still remains well below the global average.

Oil

Meanwhile, world oil demand rose by 1.6 per cent (1.5 million barrels a day) in 2017, a rate that was more than twice the annual average seen over the last decade.

An increasing share of SUVs and light trucks in major economies and demand from the petrochemicals sector bolstered this growth.

Global oil demand rose by 1.5 million barrels a day (mb/d) in 2017, continuing a trend of strong growth since prices fell in 2014. The rate of growth of 1.6 per cent was more than twice the average annual growth rate seen over the past decade, the report said.

One of the main drivers of growth was the transport sector, IEA said. Vehicle ownership levels increased in 2017, as did the share of Sport Utility Vehicles (SUVs) and other large vehicles.

This was particularly visible in the United States, where the share of SUVs and light trucks increased from 47 per cent in 2011 to around 60 per cent of total sales in 2017, bringing up the share of these vehicles in the total passenger car fleet to almost half. It is also a factor in the European Union, where oil demand increased by 2 per cent, the highest rate of growth since 2001.

The trend towards larger vehicles has also slowed the pace of decline in average vehicle fuel use, partly offsetting energy efficiency policy efforts. Electric cars are making rapid inroads in many markets, particularly in China, which is leading global sales. For now, however, the strong growth in electric-car sales remains too small to make a dent in oil demand growth.

Another reason behind robust demand growth is oil used as a petrochemicals feedstock. Petrochemicals are the fastest-growing source of oil demand, notably in the United States, where the shale revolution has created very cost-competitive domestic supplies, as well as in China and in other emerging economies, where demand for plastics and other petrochemical products is growing rapidly. It should be noted, however, that the oil use in the petrochemicals sector has only very little impacts on emissions trends as most of the oil is not combusted but transformed into other products, such as plastics.

Around 60 per cent of the growth in oil demand came from Asia, the report said. Although China is the leading global market for the sales of electric cars, it was also the top contributor to oil demand growth, followed by India.

Meanwhile, oil demand in the Middle East, a recent source of demand growth, was flat due to oil-to-gas switching in the power sector and efforts to reform oil product prices and phase out subsidies.

“While a slowdown in oil demand growth may be likely in coming years, there are no signs of a peak in demand anytime soon. As noted in the IEA’s recent World Energy Outlook 2018 and Oil 2018 reports, it is too soon to write the obituary for oil,” the report said.

Natural Gas

Global natural gas demand grew by 3 per cent, thanks in large part to abundant and relatively low-cost supplies. China alone accounted for almost 30 per cent of global growth. In the past decade, half of global gas demand growth came from the power sector; last year, however, over 80 per cent of the rise came from industry and buildings.

The report said that natural gas demand grew by 3 per cent in 2017 thanks to abundant and relatively low-cost supplies, as well as fuel switching in key economies, significantly above the average growth of 1.5 per cent of the last five years. China alone accounted for nearly 30 per cent of global growth – with more than 30 bcm out of a total of nearly 120 bcm. This signals a structural shift in the Chinese economy away from energy-intensive industrial sectors as well as a move towards cleaner energy sources, with both trends benefiting natural gas.

IEA said that as part of the official policy drive to “make China’s skies blue again,” there has been a strong push to phase out the practice of burning coal in industrial boilers (especially those in and around major cities) as well as reduce coal use for residential heating. China’s surging gas demand means that it absorbed much of the slack in LNG markets, pushing up international spot prices for gas in the latter part of the year.

Meanwhile, the European Union also saw strong growth in gas demand (continuing the trend from 2016), with consumption up around 16 bcm in 2017. Some of this increase was weather-related, for instance due to a poor year for hydropower. Demand from industry also reportedly picked up on the back of stronger economic activity. Gas consumption in the European Union is still more than 10 per cent below the peak seen in 2010. Gas imports were near historical highs as domestic production tapered off, notably in The Netherlands.

In the United States, gas-fired generation in 2017 fell by 8 per cent, or 110 TWh, offsetting half of the increase in gas demand for electricity generation elsewhere. The case of the United States last year highlights the importance of relative prices in determining emissions intensity trends in the power sector: a slight rise in the natural gas price in 2017 saw gas-fired generation squeezed by both renewables and coal.

“The composition of gas demand growth is changing. In the past decade, half of global gas demand growth came from the power sector. In 2017, over 80 per cent of the growth came instead from industry and buildings. The power sector remains the largest single component of global demand, but this share is likely to decline gradually,” IEA said in its report.