By Tilak Doshi
BP published its annual Statistical Review of World Energy (70th edition) last week with updated global energy data for 2020. As usual, the publication – widely hailed as the “Bible of the Global Energy Industry” – was accompanied by widespread media coverage (here , here and here). The editorials in news outlets and major newspapers focused on two aspects: the impact of the Covid pandemic on drastically reducing energy needs (and thus CO2 emissions) and on the ongoing “good news” of the rapid growth in solar and wind power capacity. The far-reaching coverage of the leading daily newspapers was lacking in the far more momentous realities of the dominance of fossil fuels and the role of developing countries – which make up over 80% of the world’s population – in increasing energy demand.
As energy demand collapsed around the world with the introduction of Covid locks, 2020 saw the biggest drop in carbon dioxide emissions since World War II, according to the report. BP’s chief economist, Spencer Dale, noted in a pre-review note that this brings the world closer to the path it needs to take to “keep global warming below 20 ° C this century,” but not the ” crucial change ”that is needed to achieve the supported climate goals by the Biden administration, the EU and the whole range of multilateral agencies including the International Energy Agency, the World Bank, the International Monetary Fund and the European Central Bank.
While the global total energy consumption decreased by 4.5% in 2020, the oil share decreased even more at 9.3%. This particularly reflected the collapse in demand for transport fuels. In contrast, the increase in wind and solar capacity has been described as “colossal” by Mr. Dale, who said: “The increase in installed capacity over the past year has been 50% greater than ever in history, despite the world in turmoil , despite the greatest peacetime recession. “Mr Dale seems encouraged to say,” The trends we see here are exactly the trends we would want if the world went to net zero … ” .
While much of the above seems to be compatible with the narrative of the “energy transition”, it is similar to wagging the dog’s tail. After decades of government mandates and hundreds of billions of dollars in subsidies in Western Europe and North America, renewables (including wind, solar, and nontraditional biofuels) accounted for just 5.7% of global energy consumption in 2020. Fossil fuels (coal, oil, and gas) accounted for 83% of global energy consumption. Even in rich countries, fossil fuels cover an average of 78% of their energy needs. Another report released last month found that the proportion of fossil fuels in the world’s total energy mix is as high as it was a decade ago, despite pressure on governments to act against climate change.
If fossil fuels dominate the energy mix, developing countries, especially in Asia, increasingly determine the geographic distribution of energy consumption. Developing countries accounted for 61% of global energy needs in 2020, with energy consumption in China alone exceeding that of the EU and the US combined. The importance of coal – the most demonized of the fossil fuel trio – to developing countries in Asia is enormous. Developing countries accounted for almost 82% of global coal consumption, and developing countries in Asia accounted for almost all of that. China alone accounted for 54% of global coal demand.
Perhaps the best way to measure the role of developing countries in Asia in developing global energy demand is incremental. BP data shows that in the 5 years to 2019, 88% of the increase in global energy demand came from developing countries. The developing countries of Asia absorbed nearly three quarters of the global increase in energy demand during this period, with China alone accounting for 41%.
When the world emerges from the economic devastation of pandemic lockdowns, these patterns of energy demand will resurface. In fact, the first signs are already visible. Energy demand has rebounded as Covid vaccines roll out, governments relax lockdowns, and passenger and cargo traffic increases. Global oil consumption is now well on track to hit pre-Covid-19 levels by the first quarter of next year. The top price for Brent crude oil is now at a multi-year high of over USD 75 per barrel. The average Brent price for 2020 was just under $ 42 per barrel. The Biden government is now facing the ultimate irony of pressuring the OPEC + cartel to open its oil taps while continuing to struggle to halt domestic oil and gas production in the name of “fighting climate change.” The country now has the highest gasoline prices since 2014, threatening the democratic government’s already-tarnished popularity polls and its green and infrastructure spending plans.
While Americans and Europeans are paying more for oil and natural gas, the Middle East and Russia are gaining significant leverage in these markets. But the most important driver of global energy geopolitics goes beyond the self-displacement of the USA as the world’s leading oil and gas producer on the supply side. The juggernaut of growing energy demand from developing countries, especially in Asia, is the elephant in the room.
The plutocrats, who meet regularly at the World Economic Forum, and the political decision-makers in Western Europe and the USA have pushed their agendas “Global Reset” and “Build Back Better” in the wake of the Covid pandemic. Can they stop 80% of the world’s population from climbing the very same ladder of energy that the now developed countries have climbed to enjoy their higher standards of living and all of the privileges that come with richer, healthier lives? Will they be able to block Chinese President Xi’s 2049-year vision of a “great modern socialist nation in all respects” dependent on fossil fuels?
The most important oil and gas producers in the Middle East and Russia do not believe this: They have invested enormous sums in expanding their production capacities. You can be sure that the demand for their energy resources will be necessary for human thriving in the decades to come.
Dr. Tilak Doshi, Senior Visiting Research Fellow, Middle East Institute, National University of Singapore. This article represents the opinion of the author only and does not represent the opinion of any institution with which it is affiliated.
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