BP World Energy Review For 2014

By Paul Homewood  

 

http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11664366/BP-sees-tectonic-shift-in-world-energy-production.html

 

The Telegraph has a good analysis of the 2014 Statistical Review of World Energy, hot off the press from BP:

 

Global energy consumption slowed to its slowest rate of growth since the late 1990s last year in what BP’s chief economist Spencer Dale has described as a “watershed” moment as production of oil outside the Opec cartel surged.

 

Total energy consumption growth slowed to just 0.9pc, while in China consumption growth slowed at the fastest rate since 1998, according to BP’s closely watched Statistical Review of World Energy.

Mr Dale wrote in the report: “In years to come, it is possible that 2014 may come to be seen as something of a watershed for the energy industry. Not so much because of the near-term volatility associated with the sharp fall in oil prices and the various adjustments that triggered. That volatility is more a return to business as usual. But rather because some of the longer-term trends which are likely to have a huge bearing on the shape of the energy sector over coming years, came to the fore.”

These long-term trends included a surge in the supply of oil from countries outside Opec, primarily US shale and the stalling of demand for coal in China and natural gas.

Oil prices plummeted last year to start 2015 at six-year lows after a price war broke out between members of the Organisation of the Petroleum Exporting Countries (Opec) and producers outside the cartel. Coal also saw sharp declines in prices last year.

Consumption of crude oil grew by just 0.8m barrels per day last year, down from an increase of 1.4m bpd, which helps to explain the dramatic decline in prices.

The report also highlights the growing role of renewables, which grew at the fastest pace of any energy source despite only accounting for 3pc of primary supply. Global emissions also fell to their lowest level of growth since 1998 led by a sharp slowdown in carbon dioxide output in China.

 

 

A couple of points worth noting:

 

1) Renewables still only account for 3% of primary energy supply (excl hydro). Clearly, any idea that these are going to supplant fossil fuels in the foreseeable future is pure fantasy.

2) There is naturally a big focus on China, where there has been a slowdown in the rise in consumption, and reduction in energy intensity. However, the final chart explains the reasons for this.

Quite simply, the growth in the heavy industry sectors such iron and steel, and construction has been much less than the growth of overall GDP.

It was always inevitable that this would happen, and that much of future growth would be in lower energy sectors.

This, of course, does not mean that the heavy industry sectors, or their demand for energy, will decline in years to come- quite the contrary.

 

The full BP Review is here.