Year of the Swan – global energy trends in 2012

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BP’s eagerly awaited Statistical Review of World Energy for last year – a staple data source for industry, governments, academia, and, of course, journalists – was launched in London earlier this month by CEO Bob Dudley and chief economist Christof Rühl.

On the surface it charts what looks like an unsurprising year, in terms of global trends among the primary energy sources – oil, gas, coal, nuclear electricity, hydroelectricity, and other renewables. But, as Rühl outlined in his always-useful detailed analysis of the year’s trends, beneath the surface there were many moving parts. Informally, therefore, amongst the team that Rühl leads 2012 was the “Year of the Swan”.

We focus on how the unconventional oil and gas revolution in North America is impacting the global natural gas business in a separate article in this issue: “Resurgent USA re-shaping global energy markets.” Here, we look at the overall picture that the 2012 review paints.

Primary energy: World primary energy consumption grew by 1.8% on 2011, well below the ten-year average of 2.6%, partly because of the economic slowdown, but also because consumers responded to high prices by using energy more efficiently.

Graph showing 3 fossil fuel market share convergence

THE EVOLVING FUEL MIX – The left-hand chart shows the three fossil fuels are converging in terms of market share, as oil’s share falls and gas’s share rises. Coal’s share rose to 30% in 2012, the highest since 1970. The right-hand chart shows the absolute changes. (Courtesy of BP)

The long-term shift of demand growth from the OECD economies to the emerging economies continued. China and India alone accounted for 90% of consumption growth. In the OECD, energy demand has been falling despite rising GDP. “In primary energy consumption,” said Rühl, “the OECD is now back to where it was in 2002, despite cumulative GDP growth over this period of 26%.”

Fossil fuels: Coal remained the fastest-growing fossil fuel, though consumption growth of 2.5% was well below the ten-year average of 4.4%. That, however, was enough for coal to reach its highest share of global energy consumption since 1970: 29.9%.

Second-fastest was natural gas, with consumption up by 2.2%, again below the historical average of 2.7%. Globally, gas accounted for 23.9% of primary energy consumption.

In third place was oil, with global consumption up by 0.9%, also below the historical average. It remains the largest fossil fuel in terms of market share – 33.1% of global energy consumption – but it continued to lose share for the 13th consecutive year. As a result, its market share in 2012 was the lowest in BP’s dataset, which goes back to 1965.

Low- and zero-carbon energy sources: The share of renewables (excluding hydroelectricity) continued to grow rapidly – by 15.4%, slightly above the historical average – but they still accounted for only 2.4% of global primary energy consumption, up from 0.8% in 2002.

Hydroelectric output rose by an above-average 4.3%, with China accounting for all of the net increase.

Nuclear electricity fell by 6.9%, the largest decline on record for a second consecutive year, but that was hardly surprising given events in Japan, where output was down 89%, accounting for 82% of the global decline.

So, not surprisingly, carbon emissions from energy use rose once again, though at a slower rate than in 2011.  They were up 1.9%, slightly faster than primary energy consumption.

Beneath the surface: Readers interested in the full detail of BP’s analysis should refer to BP’s website, where all the key documents are available for download, including Rühl’s detailed analysis. Here, in brief, are some of the most notable below-surface shifts of 2012:

  • Oil – Production rose twice as fast as consumption as some countries built up their inventories because of concerns about supply security. The US recorded the world’s largest increase and the largest annual production gain in its history. Output was also up in Libya, Saudi Arabia, Iraq, Kuwait, Canada and Russia. Output fell in Iran (because of sanctions), Sudan, Syria, Yemen and the North Sea.
  • Gas – The US saw the largest gain in consumption – 4.1% – as low prices stimulated demand, especially in electricity generation. Demand also rose in Asia, but fell in Europe and the Former Soviet Union. Gas price spreads between regions increased.
  • Coal – Consumption growth moderated to almost half the rate of 2011. Coal remained a China story, with China accounting for more than half the world’s coal consumption for the first time. Elsewhere, the slow-down was widespread, with Africa and the European Union being the only regions seeing notably faster growth. By country the main exceptions to this trend were Japan and India.
  • Renewables – Globally renewables still supply only a few percentage points of electricity demand, despite rapid growth. However, penetration is high in some markets, such as the EU, where they accounted for 12.9% of all electricity in 2012. Growth was led by three countries: China (25.1%), the US (12.3%) and Italy (29.5%). China overtook Germany to become the second-largest renewable power producer behind the US.