Energy: Centre of power is on the move

The story of energy in the 21st century has been the relative decline of the developed world as both a producer and a consumer.

New forces with serious global ambitions such as China National Petroleum Corporation and Russia’s Gazprom have emerged on the world stage, and global markets for oil, gas, coal and uranium are increasingly shaped by emerging economies’ rapacious demand.
Those trends are set to continue and intensify. The question for the US, the European Union and Japan will be how well they can adjust to that change.

On the demand side, the strongest sustained period of global growth for decades has been fuelled by a surge in energy use, which has naturally been fastest in emerging economies, being both faster-growing and less efficient in their energy use.

In 1990, countries that are not members of Opec, the rich nations’ club, accounted for 48 per cent of total energy use. By 2015, the International Energy Agency expects that figure to rise to 57 per cent.

The forms of energy consumed by developing countries are also changing: the proportion from biomass – traditional sources such as wood and dung – is expected to drop from 35 per cent to about 20 per cent over that 25-year period.

The rise of modern industries, together with the spread of consumer durables such as cookers, refrigerators and cars, transforms energy demand in emerging economies and gives them more influence in global resource markets. Oil product demand in North America, for example, is about 25.6m barrels per day, compared with just 7.5m b/d in China. But China’s demand rose by about 350,000 b/d last year, or 4.8 per cent, while North America’s rose 260,000 b/d, about 1 per cent.

For coal, emerging economies are already dominant. China and India already account for 45 per cent of global coal use, and that proportion is set to grow. China is, notoriously, adding generation capacity at the rate of a new 1,000 megawatt coal-fired power station every few days (doubts about the data make it hard to be confident exactly how much new capacity is being built).

For gas, emerging markets are less important, but growing fast. The IEA expects China’s consumption growth to average 9.3 per cent a year from 2005 to 2015.

Financial Times