What and who were the movers and shakers in the energy mix last year? BP’s chief economist Spencer Dale talks through the headlines from the BP Statistical Review of World Energy 2017, a publication that is now in its 66th year
1. Three-year pattern: weak energy growth
“The headline from this year’s Statistical Review is weak growth in energy consumption again. It’s the third consecutive year where we’ve seen growth of only one per cent - or less. That’s around half the average rate we’ve seen over the last ten years. As was the case in 2015, growth was below average in all regions except Europe and Eurasia. And, with the exception of oil and nuclear power, all fuels grew at below-average rates.”
2. On demand: developing world dominates
"Almost all the growth in global energy consumption in 2016 came from fast-growing developing economies; China and India account for around half. Energy consumption in China grew by only 1.3%, another year of weak growth. In fact, growth during 2015 and 2016 was the lowest over a two-year period since 1997 and 1998."
Did you know?
China remained the world's largest growth market for energy for a 16th successive year.
3. Dual forces: short and cyclical versus long-term transition
“There were two big forces effecting global energy markets in 2016. Firstly, the need for short-run adjustments, particularly in the oil market as it worked through this sustained period of excess supply. Then, at the same time, there was a growing gravitational pull from the long-run energy transition that is taking place – that amounts to slower energy growth and a shift in the pattern of demand away from traditional markets towards fast-growing developing economies such as China and India. And, of course, that energy transition also sees a movement towards cleaner, lower carbon fuels, with strong growth in renewable energy and declining coal consumption.”
4. Flat lining: a decisive break for carbon emissions?
“Carbon emissions were essentially flat in 2016, marking the third consecutive year that they’ve either remained stable or fallen, so this represents quite a pronounced break from the past.
Much of this slowdown in carbon emissions over the last few years can be traced back to the fundamental changes we’re seeing in the Chinese economy and their energy consumption. A big question this poses is ‘how much of this change reflects a decisive break from the past which we can expect to persist – or how much reflects more short-term cyclical factors that may unwind over time?’ Looking at the data in detail, our best guess is that it’s down to a little of both.”
5. High rise: renewables soar again
“2016 saw a continuing shift in the fuel mix. It was another year of strong growth in renewable energy, with an increase of 12%, which is below the 10-year average, but the largest increment on record. Wind provided more than half of this growth in renewables, while solar energy contributed almost a third.”
6. Market balances: oil’s year of adjustment
“Oil demand continued to grow strongly last year, supported by low oil prices. And those low prices then started to bite on oil supply, particularly from the non-OPEC world, which declined sharply. It was the largest decline in non-OPEC output we’ve seen for 25 years or so.
Did you know?
Dated Brent averaged $43.73 per barrel in 2016, down from $52.39 in 2015. This was the lowest annual average since 2004.
That combination of strong oil demand and weak supply allowed the market to gradually adjust, bringing back daily consumption and daily production broadly into balance by the second half of the year. But this left oil stocks at record high levels, which continued to push down on prices – resulting in another year of weak oil prices.”
7. Two protagonists: US tight oil and OPEC
“Within the oil market, the year was dominated by the behaviour of two actors: US tight oil and OPEC. As many people had expected, US tight oil did respond to price signals – production had come off quite sharply in 2015 and 2016, and more recently has started to come back on again and in doing so, has acted to dampen price volatility. The other thing we learned about US tight oil was its resilience. It’s quite similar to a toy that I used to have as a child, called a Weeble. Weebles wobbled, but they didn’t fall down completely – you would push them down and they’d bounce back up again. I think that’s how we should think about US tight oil: it responds to price falls in the short run, but bounces back as the market adjusts.
The other big player in the oil market, OPEC, had a big impact towards the end of last year when it announced a cut in production to increase the pace of bringing inventories back into line. That was a reminder to people about the major role the organization continues to play.”
8. Ready for export: in liquid form
“For natural gas, 2016 was a relatively weak year in both demand and production, with production in particular held back by falling gas prices. Perhaps the dominant feature for natural gas last year though was the continuing growth of exports of liquefied natural gas (LNG), especially for Australia. This is likely to continue to have a major impact on global gas markets in coming years, not only moving towards a more integrated market, but also a more flexible one, with shorter and smaller contracts – and an increasing amount of LNG trade which is not contracted and is freely traded."
Did you know?
Gas trade grew by 4.8% in 2016. Most of the net growth in LNG exports came from Australia with 19 billion cubic metres out of 21 coming from there.
9. End of the road: coal’s demise?
“We saw another sharp decline in both coal consumption and production last year. Some of that can be traced back to the very significant policy measures that were introduced in China last year, as it took steps to reduce the levels of excess capacity within its domestic markets. Those measures then had a knock-on effect on the rest of the world.
But at the heart of coal’s decline are the longer-run trends we see across the world, moving towards cleaner, lower carbon fuels. The UK was a particularly pronounced example of this, where we saw levels of coal production and consumption in 2016 fall back to the same levels of the 1800s, at the time of the industrial revolution.”
10. Light bulb moments: energy efficiency and the power sector
“We’ve seen almost no growth in power demand in the OECD economies over the last few years, even as their economies have developed. We think that much of this can be linked back to improving energy efficiency – such as the widespread deployment of LED lightbulbs. We’ve shone a light on the power sector in this year’s Review, since it’s at the cutting edge of the energy transition.”