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Global Energy Consumption Rises as Supplies Lag; Coal Still the Fastest Growing Fuel in the World

18 June 2008

Bpstat1
Global consumption of energy, in million tonnes of oil equivalent. Click to enlarge.

According to the just-published BP Statistical Review of World Energy 2008, the ongoing strength of world economic growth last year, despite financial market turmoil which began in August, continued to support global energy consumption. Although growth in primary energy consumption slowed in 2007 compared to 2006, at 2.4% it was still above the 10-year average for the fifth consecutive year.

Coal remained the fastest-growing fuel, but oil consumption grew slowly. Oil is still the world’s leading fuel, but has lost global market share for six consecutive years, while coal has gained market share for six years.

The defining feature of global energy markets remains high and volatile prices, reflecting a tight balance of supply and demand. This has put issues such as energy security and alternative energies at the forefront of the political agenda worldwide.

—Tony Hayward, BP CEO

The oil price has been on an upward path for more than six years, which according to BP’s data series going back to 1861, is the longest period of rising prices on record.

Dated Brent crude oil averaged $72.39 per barrel in 2007, an increase of 11%. Prices rose steadily throughout the year, from a low of just over $50 in mid-January to above $96 by year-end. Temporary bottlenecks caused the USA benchmark WTI to trade at a discount to Brent for the first time since 1979. Discounts for heavy, sour crudes remained high reflecting constraints on upgrading capacity in refining.

Global oil consumption grew by 1.1% in 2007, or 1 million barrels per day (bpd), slightly below the 10-year average, according to the Review, while global oil production fell by 0.2%, or 130,000 bpd, the first decline since 2002.

Consumption in the oil exporting regions of the Middle East, South and Central America, and Africa accounted for two-thirds of the world’s growth. The Asia-Pacific region grew by 2.3%, even though growth in China and Japan was below average, with strong growth in a number of emerging economies. OECD consumption fell by 0.9%, or nearly 400,000 bpd.

OPEC production dropped by 350,000 bpd due to the cumulative impact of production cuts implemented in November 2006 and February 2007. Increased output in Angola and Iraq, and growing supply of condensates/NGLs, partially offset larger cuts in other OPEC countries.

Oil production growth outside OPEC remained weak, rising by just over 200,000 bpd in 2007; OECD output fell for a fifth consecutive year. FSU (Former Soviet Union) output rose by nearly 500,000 bpd, with Azerbaijan and Russia each growing by more than 200,000 bpd.

Proved oil reserves were essentially flat in 2007—at 1.24 trillion barrels—and are sufficient to meet current production for more than 41 years, according to BP. However, the 2006 world total was revised up by 31 billion barrels upon receipt of more complete information.

World natural gas consumption grew by an above-average 3.1% in 2007, although only North America, Asia-Pacific, and Africa recorded above average regional growth. The USA accounted for nearly half of the world’s gas consumption growth, driven by cold winter weather and strong demand for gas in power generation. Chinese consumption grew by 19.9% and accounted for the second-largest increment to global gas consumption. EU consumption declined by 1.6%—the second consecutive decline-in face of warm winter weather.

Gas production rose by 2.4% in 2007. The USA accounted for the largest increment to supply, growing by 4.3%, the strongest growth since 1984. EU production declined by 6.4%, with UK output falling by 9.5%, the world’s largest volumetric decline for a second consecutive year. A small decline in Russian production was more than offset by strong growth elsewhere in the FSU. China and Qatar recorded the second- and third-largest increments to production, increasing by 18.4% and 17.9% respectively.

LNG shipments rose by 7.3%, supported by continued growth in shipments from Qatar and Nigeria. USA LNG receipts rose by one-third as a large price premium to European spot markets resulted in the diversion of cargoes to the USA.

Other highlights of the Review include:

  • Coal was the fastest growing fuel in the world for the fourth consecutive year. Global consumption rose by 4.5%. Consumption growth was widespread, with growth in every region except the Middle East exceeding the 10-year average. Chinese coal consumption rose by 7.9%, the weakest growth since 2002, but more than two-thirds of global growth. Indian consumption rose by 6.6%, and OECD consumption rose by 1.3%, both above average figures.

  • Nuclear power output fell by 2%, the steepest decline on record. However, more than 90% of this decline was accounted for by Germany and Japan—which saw the world’s largest nuclear power plant closed following an earthquake. Hydroelectric generation increased by 1.7%, slightly below the 10-year average. Increased capacity in China and Brazil was partially offset by drought-related declines in the USA and Southern Europe.

  • Renewable energy remains a small share of total global energy use, but most renewable sources experienced rapid growth in 2007. Ethanol output rose by 27.8%. Global capacity for wind and solar electricity generation grew broadly in line with historical averages of 28.5% and 37%, respectively.

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June 18, 2008 in Market Background, Natural Gas, Oil | Permalink | Comments (104) | TrackBack (0)

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Global oil consumption grew by 1.1% in 2007, or 1 million barrels per day (bpd), slightly below the 10-year average, according to the Review, while global oil production fell by 0.2%, or 130,000 bpd, the first decline since 2002.

I got curious and looked into the report. I noticed a consistent difference between production and consumption, the latter being consistently higher than the former.

Can somebody explain to me how this is possible?

Anne:

Very good question. Somebody must have used their accumulated reserves/stocks. A differential of about 1.13 million barrel/day is equivalent to only 412 million barrels for the whole year.

One thing is about certain, the world will use more and more energy unless we are hit with a serious economic recession and much more efficient vehicles and HVAC are massively introduced.

However, as many very large nations like China, India, Brazil, Russia etc raise thieir living standards, they will do like USA, Canada, Australia, EU etc and consume much more energy.

The only way to reduce the negative impacts would be to switch to much cleaner electrical energy and progressively phase out oil, coal and ICE vehicles.

@ Anne ~> Can somebody explain to me how this is possible?
We have lots of oil in storage, not just the strategic reserves. Overproduction in past years was stored. as Harvey pointed out, some of this stored oil gets used when there is a production shortfall. What we see now is a production decline, and a dip into all the stored oil.

We know this flat and now falling world oil production level is due to "peak oil" and that future oil production will never increase.

Where I was a bit surprised was seeing the claim that "Coal was the fastest growing fuel in the world for the fourth consecutive year. Global consumption rose by 4.5%."

Obviously this coal claim referred to total growth capacity, because "renewable sources experienced rapid growth in 2007. Ethanol output rose by 27.8%. Global capacity for wind and solar electricity generation grew broadly in line with historical averages of 28.5% and 37%, respectively."

I think that the renewable sources are now large enough in total capacity to deserve a place on that graph. Renewable energies are the fastest growing energy source by percentage growth.

@ Anne ~> Can somebody explain to me how this is possible?
We have lots of oil in storage, not just the strategic reserves. Overproduction in past years was stored. as Harvey pointed out, some of this stored oil gets used when there is a production shortfall. What we see now is a production decline, and a dip into all the stored oil.

We know this flat and now falling world oil production level is due to "peak oil" and that future oil production will never increase.

Where I was a bit surprised was seeing the claim that "Coal was the fastest growing fuel in the world for the fourth consecutive year. Global consumption rose by 4.5%."

Obviously this coal claim referred to total growth capacity, because "renewable sources experienced rapid growth in 2007. Ethanol output rose by 27.8%. Global capacity for wind and solar electricity generation grew broadly in line with historical averages of 28.5% and 37%, respectively."

I think that the renewable sources are now large enough in total capacity to deserve a place on that graph. Renewable energies are the fastest growing energy source by percentage growth.

@ Anne ~> Can somebody explain to me how this is possible?
We have lots of oil in storage, not just the strategic reserves. Overproduction in past years was stored. as Harvey pointed out, some of this stored oil gets used when there is a production shortfall. What we see now is a production decline, and a dip into all the stored oil.

We know this flat and now falling world oil production level is due to "peak oil" and that future oil production will never increase.

Where I was a bit surprised was seeing the claim that "Coal was the fastest growing fuel in the world for the fourth consecutive year. Global consumption rose by 4.5%."

Obviously this coal claim referred to total growth capacity, because "renewable sources experienced rapid growth in 2007. Ethanol output rose by 27.8%. Global capacity for wind and solar electricity generation grew broadly in line with historical averages of 28.5% and 37%, respectively."

I think that the renewable sources are now large enough in total capacity to deserve a place on that graph. Renewable energies are the fastest growing energy source by percentage growth.

The difference between consumption and production is only 1.3%. All statistics are damaged by uncertainty and errors. I think this is the main explanation and then perhaps inventories.

Good to see OECD was able to reduce consumption of oil by 400.000 per day despite having a fine economic growth. That was caused by oil going up just 11% in price in from 2006 to 2007. Expect a much bigger drop in OECD oil consumption this year when oil prices are on track to increase from averaged $72.39 per barrel in 2007 to perhaps an average of $130 for 2008.

Sad to realize that wind and solar are still so small that it isn’t worth mapping it. Wind is 1.6% of global electricity production ultimo this year. This is probably 0.5% of global energy consumption. However, wind will contribute almost 11% of all new electricity installed in 2008. Growing at 30% it will not take long to do all new electricity needed to sustain continued economic global growth.

We know this flat and now falling world oil production level is due to "peak oil" and that future oil production will never increase.

We "know" no such thing.

The whole "peak oil" theory depends on two assumptions - technology remaining constant, and no new sources of oil being tapped.

Obviously, both of these assumptions are wrong. Oil production technology constantly advances...that's why the Bakken field has been upgraded from 151 million barrels recoverable to 3+ billion barrels. There will almost certainly be future upgrades to that number. Offshore drilling technology also improves continuously, which is why Brazil's recent discoveries of large quantities of offshore oil are so promising. Twenty years ago that oil would have been unrecoverable.

Likewise, new oil fields are poised to be tapped. As prices continue to rise, there will be increasing pressure for the U.S. to drop its silly bans on offshore and ANWR drilling. The estimates are that there's nearly 100 billion barrels of oil off the U.S. coast; that's roughly the amount of oil in all of Iran or Kuwait. Let's not forget that Iraq is continuing to increase production (they're past their pre-war highs even now), Brazil will soon produce much more, and so on.

Even places like Mexico, with its incompetent state oil company, are starting to look at ways to get assistance from competent private-sector companies. If and when this occurs, even currently-declining fields such as Cantarell will likely increase production.

Peak oilers are no different than the religious cultists who "know" when Jesus will return. "He's coming Friday! No, wait, my calculations were off...it's next Friday! Er, no, *now* I got it..."

Something that is worth observing is that while global oil production is growing at about 0% the oil consumption in the oil exporting countries is growing fast. This means the available exportable oil is dropping fast. This is new. Previously exportable global oil was increasing. This must be very important at explaining why oil suddenly starts to raise so fast in price as we have seen it since primo 2007. Since higher oil prices means more growth and therefore more consumption in the oil exporting countries we should not see any ease in oil prices unless importantly more oil is produced. Those who could produce more are not going to now that they have realized how much more they are able to make in this industry. The Russians said recently that oil would go to $250. If Russia decreases their oil production with 1 million bpd this is where it will go and they will still make more money in total.

“Where I was a bit surprised was seeing the claim that "Coal was the fastest growing fuel in the world …”

Anyone who is surprised by this fact demonstrates a lack critical thinking and being clueless. If you plotted renewable energy on the same graph it would be bout the same magnitude as nuclear but that would be misleading.

First, compare apples to apples and oranges to oranges. Second, insignificant sources of energy should not be compared to important sources.

When considering renewable energy for electric power, there is a category called “renewable energy other” that excludes biomass and hydro generated electricity. That is because wind and solar do not produce enough electricity to discuss except in blogs like this.

So why is a ‘free’ energy source not main stream? So far, wind and solar for electricity generation has proven to not be sustainable. Will the current generation of equipment still be operating in 10 years? Will new capacity be able to put in service fast enough to keep up with demand?

The apparent answer is that wind and solar will be smaller market share compared to fossil each year until the billions who want to live a lifestyle that includes electricity have their needs met.

@Kit P.
The market share of wind and solar in global energy is not decreasing. It is of cause increasing as long as their growth rates are higher than the growth rates of other energy forms. This is elementary math.

Hardly. Solar and wind are the most abundant energy resoruces on the planet - how many watts fall on the earth every second? Every minute? Every hour? Every day?

Modern energy needs can be completely met with solar, wind and biofuels, regardless of what the fossil fuel lobby spokespeople say.

Mattew, "Peak Oil" only depends on oil being a finite resource. It is, therefore there will be a peak. The timing of the peak is what is in question.

If total demand increased 100 units of electricity with wind being 1% and doubling. Wind output would increase to 2 units or 2% of the market. In this example Henrik would be correct.

However, if demand increased 1000 units with 998 units coming from fossil, then wind would have a smaller market share. In this example Henrik would be incorrect.

However, in either case ghg is increasing. Either by 98 units or 998 units.

There are also some places like China and South Africa where more coal would have been used to meet demand. Demand was limited by supply.

Mattew, "Peak Oil" only depends on oil being a finite resource. It is, therefore there will be a peak. The timing of the peak is what is in question.

It is true that there will be a peak, yes. But it cannot be said that the peak is now, because the oil fields that are being exploited now are not the sum total of all the oil fields on the planet; there are yet many hundreds of billions of barrels of oil that can be added to reserves. So for the purposes of peak oil calculations, reserves cannot yet be treated as finite.

But I agree that a peak in oil production will someday come...but for that matter, Jesus will probably show up again as well.

official productions figures a bit low? OPEC countries often cheat on their official production quotas and pump more than they say they do.

Ike, you seem to have a problem with English verb tenses. There is a big difference between ‘is’ and ‘can be’ but as an engineer in the electricity generating industry I strong disagree with claims that the needs of society can be met with wind and solar.

Again, for the slow learners. Fossil fuel use IS increasing faster than our ability to convert renewable energy to a useful form. This IS why BP and others spend so much time collecting such statistics. If ‘renewable energy other’ was an important statistic and fossil fuels were becoming less important, then we could all just stop worrying about running out of fossil fuels and AGW.

Ike, you seem to have a problem with English verb tenses. There is a big difference between ‘is’ and ‘can be’ but as an engineer in the electricity generating industry I strong disagree with claims that the needs of society can be met with wind and solar.

Again, for the slow learners. Fossil fuel use IS increasing faster than our ability to convert renewable energy to a useful form. This IS why BP and others spend so much time collecting such statistics. If ‘renewable energy other’ was an important statistic and fossil fuels were becoming less important, then we could all just stop worrying about running out of fossil fuels and AGW.

Matthew,

You do not understand Peak Oil theory.

Simply put, the theory states not that oil will run out soon, but that as all the "easy" oil is extracted, the cost (political, social and economic) of extracting and processing the "harder" oil will continue to rise until reliance on extracted petroleum as a primary energy source for transportation and large scale energy generation will become diseconomic.

That is exactly what is happening, and your examples *prove* the point. The recent Petrobras discoveries and the massive oil sands expansion in Canada are welcome discoveries, but the Petrobras oil is *250 KM* offshore, below 2-3000 meters of water, and under *6700* meters of earth, with per-well costs far, far above $100m. http://www.greencarcongress.com/2008/05/petrobras-annou.html

And the oil sands cost $50-80/BBL to extract a funny stew that costs much, much more to refine.

So now the global average cost of extraction and refining is climbing rapidly, and still can't keep up with demand.

That is proof of true Peak Oil theory in action. There is no need to panic; it is a good idea to see if we can find our own Petrobras oil offshore. But it is time to acknowledge the rise in cost to something around $80-100 is now permanent, and it could be double that two years years. Really, the steady rise in price over the last five years points inevitably in that direction.

You then plan accordingly, and invest hundreds of billions to change your transportation and energy infrastructure to prepare for the new modern world (instead of, say, $500-800B on a pointless military adventure in the Middle East). Or put your head in the sand. Your choice.

Don’t guess or be misinformed by troll or green propaganda; Get the best info available. For example, listen to T. Boone Pickens himself about oil production and consumption and Wind.

This is a CSPAN video broadcast.

Senate Broadcast


Witnesses

Panel 1
The Honorable Harry Reid - Member, U.S. Senate

Panel 2
The Honorable Kevin Kolevar, United States Department of Energy
Mr. T. Boone Pickens, BP Capital
Mr. Rich Halvey, Western Governors' Association
Mr. Bryce Freeman, Wyoming Infrastructure Authority

Panel 3
The Honorable Gary Hanson, South Dakota Public Utilities Commission
Mr. Stephen Wright, Bonneville Power Administration
Mr. Will Kaul, Great River Energy
Mr. Don Furman - , Representing American Wind Energy Association)



No, I think I understand 'Peak Oil' theory quite well. In short, it states that oil production can rise up until the point that 50% or so of reserves have been produced, then falls off. This was the basis for Hubbert's (accurate) forecast that peak oil production would occur in the U.S. around 1970 or so.

The notion that reliance on oil after that point will become uneconomic is more a consequence of peak oil, rather than a part of it. And even then, it assumes that something else is available to shift consumption to - and right now, there isn't.

So even though prices are rising, we're still using oil - meaning that there's still great value in procuring new oil. So a new well in the ocean costs $100 million or more? Who cares, when the oil below is worth half a trillion dollars? For this reason alone, oil production will continue to expand to meet demand. There will eventually be a limit to technology and reserves both, but at this time there's no reason to think we're at that point.

What will happen is that as new technologies become available (and we're close to that on several fronts), demand will shift away from oil to other energy sources. At that point we'll have reached a demand peak (we don't need any more oil) rather than the supply peak (we can't produce any more oil) that the original anonymous commenter suggested we are already at.

"Peak Oil" only depends on oil being a finite resource. It is..."

You guys ever heard of "abiotic" oil?? Take a look at Barbara Loller's study published in Nature:

Nature 444, E18 (14 December 2006) " Geochemistry: Biosignatures and abiotic constraints on early life"

There is reason to consider we may never see oil "peak" unless artificially manipulated. The point is an oil industry in its waning years will try to distract our focus on alternatives. All the more reason to NOT elevate oil pricing by taxation at this stage. Incentivize alternative energy use by lowering cost of entry via tax credits, rebates, refunds, etc. The goal is a transition to alternatives - the path is NOT punitive but incentive.

Thanks for the clarifications. I see two main explanation:
- using reserves
- statistical errors

I downloaded the spreadsheet from the BP site, and compared the numbers prior to 1990. It seems it is more the first reason, as oil production exceeded demand up until 1981. From that year on, it is the reverse.

But what when these reserves are empty? More spiking oil prices?

B.t.w. this week I saw some Iraqi oil ministry bigwig (perhaps the minister himself, I didn't pay attention to that) declare that oil is produced at a higher rate than the market can absorb, and that there is no shortage and that current oil prices are caused by speculation. Does this data prove him wrong?

Kit P:

Your math is incorrect. When coal grows by 4.5%, and renewables by 30%, they increase market share, no matter how small the current market share is.

----------------------------------------------

It is true that the absolute growth in coal is larger than renewables. However, it is not unthinkable to expect that the growth rate of renewables will remain at 30% for quite some time. That means roughly a doubling every 3 years. Then inevitably the day will arrive that the absolute growth in renewables exceeds that of fossil fuels.

Pickens must be getting senile. He has just bought a whole bunch of wind turbines from GE and all he needs is congress to change some laws so he can build a transmission lines to get the electricity from where the wind is to where the demand is.

It is stupidly such as this that is the reason fossil fuels are use is growing so fast. Pickens will fail. The rule of law in the US will not be abandoned so that some rich AH can make money. For some unknown reasons think that due process goes away just because someone claims they a being altruistic.

John McCain and Bush proposed wide spread oil drilling yesterday. The plain fact is that America has only 3% of world's oil reserve, so oil drilling can never reduce gasoline price, but increase Bush's oil fortunes.

What we need are not some tired old plays from Oil lobby's play-books, but some real change. Wind, Solar, Tidal, and PHEVs.

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