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Big new report from McKinsey: “Averting the next energy crisis: The demand challenge”
McKinsey Global Institute
Global energy-demand growth is expected to flatten in the short term but will rebound with recovery. Indeed, there is potential for liquids-demand growth to outpace that of supply—risking a new spike in oil as soon as 2010 to 2013, depending on the depth of the economic downturn.
Chapter Summaries
Chapter 1: Energy demand set to rebound after short lull
Since GDP is the most important driver of energy demand and the trajectory of world economic growth is exceedingly uncertain, the report presents several scenarios for energy-demand growth to give a feel for the range of outcomes possible. It examines energy-demand growth across end-use sectors and regions and by fuel type.
Chapter 2: Liquids-demand tightness could return between 2010 and 2013
Liquids demand will be stagnant in the short term due to impact of high prices in 2007 and the credit squeeze. MGI’s moderate case projects that liquids demand will grow only weakly by 0.4 percent in 2009 but will rebound in 2010 to post growth of 2.1 percent.
Chapter 3: Sectoral demand outlooks
Light-duty vehicles
The light-duty vehicles sector accounts for about 70 percent of the total road-transport sector, which is crucial to gaining an understanding the evolution of petroleum. MGI finds that energy demand from light vehicles is set to grow at 1.9 per annum to 2020. Adding to energy demand is extremely rapid growth in the vehicle stock in China, the Middle East, and India. However, robust new-vehicle efficiency standards—particularly but not exclusively in developed countries—offset this trend.
Trucks
Truck transport accounted for 4.5 percent of 2006 global demand. However, because the sector’s energy-demand growth will be more rapid than the increase in energy demand overall, its share of the total will rise to 4.9 percent of global demand in 2020. Although this is a small fraction of total energy demand, the truck-transport sector is important as a large source of petroleum demand, particularly diesel.
Air transport
Air transport accounted for 2.0 percent of global demand in 2006 but, as the fastest-growing energy end-use sector, will see its energy demand grow to 2.4 percent of global demand in 2020. While air transport accounts for a very small share of the world’s total energy demand, it nevertheless bears analysis because this sector is a rapidly growing source of demand for petroleum.
Buildings
The buildings sector, comprised of residential and commercial buildings, represented 31 percent of global end-use energy demand in 2006—making it the single-largest energy-consuming sector—and 9 percent of global petroleum demand (8 million barrels per day). MGI projects that these shares will remain steady at 31 percent of energy demand.
Industrial
The industrial sector, comprised of industries such as steelmaking, chemicals, and pulp and paper production, represented 51 percent of global energy demand in 2006 and 29 percent of global petroleum demand. The industrial sector is expected to grow at 2.1 percent a year—equal to the overall rate of energy-demand growth across sectors—and continue to account for 51 percent of global energy demand in 2020.
Power
MGI examines primary energy demand from the power sector, which is the sum of power losses from power generation and final electricity demand by end-use sectors. Primary energy from the power sector is today the largest source of primary-energy use, as well as CO2 emissions. The power sector’s primary demand represented 35 percent of global energy demand in 2006. The power sector’s primary demand accounted for five million barrels a day or 6 percent of global petroleum demand in 2006. MGI projects it will decline to four million barrels a day or 4 percent of petroleum demand by 2020.
Report authors: Jaeson Rosenfeld, Jaana Remes, Lenny Mendonca, Wayne Hu, Sendil Palani, Utsav Sethi, Scott Nyquist, Ivo Bozon, Occo Roelofsen, Pedro Haas, Koen Vermeltfoort, Greg Terzian
(24 March 2009)
The report is available as PDFs. Registration (free) is required. McKinsey Global Institute:
The McKinsey Global Institute (MGI), founded in 1990, is McKinsey & Company’s economics research arm. Its primary purpose is to undertake original research and develop substantive points of view on critical economic issues facing businesses and governments around the world. MGI’s research is funded by the partners of McKinsey and not commissioned by any business, government, or other institution.
We seek to help business leaders and policy makers understand the evolution of the global economy, improve performance and competitiveness, and provide a fact base that contributes to decision making on critical management and policy issues.
The Next Five Years–Peak Lite and the Current Oil Picture
Robert Rapier, Peak Oil Review, ASPO-USA
A few years ago, after spending a lot of time thinking about peak oil, and then watching the price of oil break out of its historical trading range and head higher, the idea of Peak Lite came to me. Over time the price of oil had bounced between $10 and $30 a barrel, but about 5 years ago it broke from that pattern and started the steady climb that culminated in $147/bbl last summer. I had been having various debates about whether we were or weren’t at the global peak in oil production (I was taking the ‘not yet but soon’ position), but it started to become clear to me that we didn’t require a global peak before we started to feel the impact of peak oil.
(22 March 2009)
The figures are missing from this version of the article. To see the figures, look at the PDF for the March 23 issue of the Peak Oil Review.
Natural Gas, Suddenly Abundant, Is Cheaper
Clifford Krauss, New York Times
The decline in crude oil prices gets all the headlines, but the first globalized natural gas glut in history is driving an even more drastic collapse in the cost of gas that cooks food, heats homes and runs factories in the United States and many other countries.
Six giant plants capable of cooling and liquefying gas for export are due to come on line this year just as the economies of the Asian and European countries that import the most gas to run their industries are slowing.
Energy experts and company executives say that means loads of gas from Qatar, Egypt, Nigeria and Algeria that otherwise would be going to Japan, Korea, Taiwan and Spain are beginning to arrive in supertankers in the United States, even though there is a gas glut here, too.
With industrial and utility use of natural gas declining, gas prices in the United States have already declined by two-thirds since the summer. Prices are not likely to go down much more, experts say, but an increase in imports is likely to keep them low until the global economy recovers and drives demand back up.
(20 March 2009)
