New Figures Show Extraordinary Growth In Energy Use Last Year

Global oil production posted its biggest increase since 2004 last year but it was a relatively weak performer in a bumper year for energy growth, according to BP’s latest annual Statistical Review of World Energy. Although oil production grew by 2.2% in 2010, oil consumption grew by 3.1% and energy demand across the board shot ahead by 5.6%, the biggest annual gain since 1973.

Growth was above its long-term trend in every region of the world and almost every fuel reached record levels of use (see chart). Coal consumption grew by 7.6%; gas by 7.4%; hydroelectricity by 5.3%; other renewables by 15.5% (though from a titchy base). The only fuel not consumed at record levels was uranium: although nuclear power grew a little, it still fell short of its 2006 level, a high-water mark which, after the Fukushima disaster in Japan, looks set to stand for some time.

Part of this is cyclical. As Christof Rühl, BP’s chief economist, notes, energy demand tends to fall faster than GDP when things go wrong, and grows faster when the situation improves. That is because energy responds to changes in investment, industrial production and transport, which rise and fall by more than the economy as a whole.

This helps explain why energy consumption handily outstripped 2010’s 4.9% growth in global GDP. But there is also a structural change at work. Economic activity is growing faster in developing countries, in general less efficient energy users, than in developed ones. Even if global GDP were static, this shift would increase consumption.

Growth in developing countries is the main reason why coal consumption rose so much. The wealthy countries of the OECD still consume more oil than the rest of the world, but non-OECD countries use 69% of the world’s coal—two-thirds of that in China. This is a big part of the reason why energy-related carbon-dioxide emissions have been growing even faster than energy use. In 2010 they grew by 5.8%—the highest rate since 1969.

The fuel that gets people most excited, though, is natural gas. The boom in American shale gas—it now represents 23% of that country’s gas production, up from 4% five years ago—has kept the price low in America, inspired exploration for similar fields elsewhere and allowed liquefied natural gas (LNG) production originally intended to serve America to seek other markets.

Over the past five years global production capacity for LNG has increased by 58% and its share of the international gas trade has risen from 23% to 31%, helping the world to shift towards more integrated and flexible markets: the average number of markets served by each gas exporter has risen from five to nine. An extrapolation of these trends published by the International Energy Agency on June 6th showed gas’s share of energy provision overtaking coal’s in less than 20 years.

Source: The Economist