Sustainable Energy Transitioner

Two days, two important reports… Today, BP released its annual review of world energy supply and demand. The economies of the world continued to increase their consumption of primary energy from fossil fuels, though at a rate of 2.4% slower than any year since 2002. Unfortunately, the fastest demand growth for a fuel was 4.5% for the dirtiest energy source, coal (at least it was slower than the previous year’s 5.2% demand growth). Cleaner burning natural gas was consumed 3.1% more than in 2006 while the largest source of energy, oil, clocked a consumption growth rate of 1.1% as its price marched upward. Wind and solar energy grew much faster, at around 28.5% and 37%, respectively, though they are building from a very small base currently less than 1% of global energy.

But the drama in this report lies in the production and reserves data. For all three major fossil fuels, supply did not keep up with demand growth – explaining the rising prices for all of them. With coal, the 3.3% increase in production fell short of the 4.5% gain in consumption, creating a shortfall of more than 60 million tons (which was provided by a fall in inventories). And a startling detail of the coal section is the downward revision of global coal reserves by 7.3% from 909 billion tons to 847 billion tons (this deserves more discussion in a future blog but I wanted to share the basic info for now). With natural gas, production increased 2.4% while consumption spiked 3.1% to create a shortfall of 400 billion cubic feet. Proven reserves of natural gas fell 2.3% largely due to a downward revision of Russian reserves. And oil was the kicker, with production actually falling amidst a rising price (economists, what happened?). Oil production fell .2% while consumption rose 1.1%, thus creating a shortfall that required a withdrawal from stockpiles and supported higher prices.

The oil production decline was caused by a mixture of stagnation in non-OPEC production in 2007 alongside an OPEC decision to lower production slightly so that the price would not fall. Now, OPEC is producing as much as it can with only a small amount of potential spare capacity held by Saudi Arabia in the form of heavy oil. With a rising middle class in China, India, and oil producing countries, consumption growth inertia will call for future oil production that may not materialize. The main thing energy importer countries can do is focus on efficiency and renewable energy generation. Germany is a model for our sustainable energy transition ahead, as they reduced their primary energy consumption by 5.6% last year and lead the world in wind and solar power production in a country thirty times smaller by land mass and less than a third of our population. If we don’t make the transition willingly, the BP data on fossil fuel energy resources seem to show we will be forced to change kicking and screaming due to further wealth losses and foreclosures due to out of control energy expenses. Here’s hoping we choose the former path. More tips to come on what we can do in the US and beyond…