World Energy Outlook
Posted December 3, 2013
International Energy Agency (IEA) Chief Economist Fatih Birol was at CSIS this week, highlighting the organization’s findings in its 2013 World Energy Outlook. The report focuses on global energy demand growth, the future energy mix and the sources of energy. Key takeaways from Birol’s presentation:
- The United States could become the world’s leading oil producer as early as 2015, two years earlier than IEA projected a year ago, Birol said.
- About two-thirds of the growth in global energy demand between now and 2035 will come from Asia.
- U.S. energy production, especially surging natural gas output from shale via hydraulic fracturing, is creating energy cost differentials that make American products more competitive in the global market.
Here’s what IEA sees in terms of global demand growth:
Birol said energy demand growth from so-called rich countries over the next two decades or so will be “negligible.” Birol:
“Where does the growth come from? It comes mainly from Asia. About two-thirds of the growth in global energy demand comes from Asia. When I say Asia we all have been talking about China for many, many years. But what we see in our numbers is that energy demand growth from China is slowing down in the 2020s, and then after that India becomes a large source of energy demand growth."
The future fuel mix will continue to be dominated by oil, natural gas and coal, he said. Twenty-five years ago these accounted for 82 percent of the energy the world uses, and today it’s still 82 percent. IEA projects these fuels will account for 75 percent of the world’s energy use in 2035. IEA’s chart:
“Looking to the future, we think that they (fossil fuels) are still going to be dominant in the energy mix.”
On the supply side, Birol said IEA has revised its projection for the U.S.:
“Last year when we published the World Energy Outlook we said around 2017 the United States will be the largest oil producer of the world. Our analysis this year does confirm that finding and in terms of oil the United States may well even be one or two years earlier, 2015, the largest oil producer of the world. This is definitely very good news for the United States and for the rest of the world.”
The world will continue to need “significant” growth in oil production from the Middle East, and IEA sees those producers largely meeting increased demand from Asia, he said. U.S. production is projected to rise and then plateau in the 2020s.
Interesting is the connection IEA makes between U.S. domestic energy production and the global competitiveness of U.S. manufactured products, including petrochemicals, steel, aluminum, cement and fertilizers. This comes from lower U.S. energy costs relative to other parts of the world:
“The (energy) price differentials in different countries, therefore, has implications for different regions, different countries’ share in the international trade of energy-intensive products. … Of course, this is good news for some and not good news for others.”
In other words, the U.S. domestic energy renaissance, as we have seen, has played a big role in launching a U.S. manufacturing revival. Energy is more affordable, lowering overall costs for U.S. manufacturers, making their products more competitive with those from places where energy costs are higher.
It’s a renaissance that can be increased with pro-energy development policies that lead to greater access to U.S. reserves and which foster more and more investments in exploration and production – creating jobs and new opportunities for U.S. goods and services in the world market.
About The Author
Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Previously, Mark was a reporter, copy editor and sports editor at an assortment of newspapers. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela have two grown children and six grandchildren.
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