Analysis: Energy Supply And The Future Of The Oil And Gas Industry
Part 1. World energy supply and demand through 2040
How will society actually meet its energy needs in the coming decades?
Predictions are all over the map — many “climate planners” and anti-oil activists speak of a rapid transition away from fossil fuels to renewables, while most informed observers see fossil fuels as important energy sources for decades to come, growing side by side with renewable technologies and applications.
A number of companies and agencies have created sophisticated models predicting future energy consumption by source. Most focus on a “reference case” using the most reasonable assumptions about population growth, regulatory regimes, technological advances, and economics.
Figure 1 shows one example: the reference case from the BP 2018 Energy Outlook, which shows steady growth in overall energy consumption through 2040. Looking at specific fuels to meet this growing demand, BP predicts that oil and coal will provide a smaller share of energy in the future; however, absolute consumption of these fuels levels off but does not fall. Natural gas consumption increases in both absolute and proportional terms. Renewables, while growing rapidly for the next 20+ years, still only satisfy a small share of world energy demand by 2040.
Figure 1. A) Worldwide primary energy consumption, by fuel, 1970-2040; B) Share of primary energy consumption, by fuel, 1970-2040. From BP 2018 Energy Outlook.
Comparing predictions with eight other sources, we see that all reference case models predict steady growth in energy consumption of 1-1.4% per year through 2040 (Figure 2). Renewables and natural gas are the largest contributors to energy supply growth, while oil, hydro and nuclear are steady but smaller contributors. Most see coal consumption increasing a small amount; only three (interestingly, all oil companies) see coal declining through 2040.
Figure 2. Estimates for growth of energy consumption (by fuel) by various agencies, 2016-2040. From BP 2018 Energy Outlook.
Some modelers run scenarios to show how the predicted fuel mix might change assuming “faster transitions” or technology changes, but these generally do not propose mechanisms which would create the faster transitions. And even in the aspirational faster transition scenarios, fossil fuels remain as humanity’s primary energy sources for the foreseeable future.
Why isn’t change happening more quickly? There is so much talk about renewables, yet they will be relatively minor contributors to the world energy picture for decades to come. A few key facts stand out, which I’ll explore in more detail in Part 2 of this series:
- World population growth, while slowing, is still substantial;
- People in lesser-developed countries desire economic growth and advanced lifestyles — like those they see in developed countries — requiring high energy consumption;
- People in highly-developed countries, having achieved certain lifestyles, have not made and are not willing to make significant sacrifices to reduce energy demand. Related to this point, ongoing improvements in energy efficiency are offset by our continued demand for more power-consuming devices and modern comforts.
These facts dictate that society’s demand for energy will continue to grow substantially into the foreseeable future. How can we meet that demand — every second of every day, without fail? How can we do that while transitioning away from fossil fuels?
Vaclav Smil, a top thinker in the fields of energy, environmental and population change, food production and nutrition, technical innovation, risk assessment and public policy (and a Distinguished Professor Emeritus at University of Manitoba), examined historical and modern energy transitions and provided several insights:
- All global energy transitions (wood to coal, coal to oil, and then to today’s diverse mix of energy sources) have been gradual, prolonged affairs;
- There is no evidence that the global primary energy transition has been accelerating during recent decades, and carbon intensity of commercial energy supply remains high;
- Global energy transition has been, so far, overwhelmingly a shift in electricity generation that has had only a small effect on the decarbonization of the overall primary energy supply;
- Global growth of renewables has not been extraordinarily rapid compared to earlier transitions. During the 25 years since 1990, the world added 25 times as much energy supply in fossil fuels as it did in “new” renewables (wind, solar and modern biofuels);
- Intermittency of wind and solar has required countries to maintain large fossil-fueled reserve capacities, hence essentially doubling the total installed power capacity;
- Even the fastest conceivable adoption of non-carbon energies will fall far short from eliminating fossil fuel combustion by the middle of the 21st century;
- The existing global energy system based on fossil fuels comprises the largest and most expensive anthropogenic infrastructure that cannot be either written off or displaced rapidly.
Groups that speak of rapid transition away from fossil fuels, and “weaning” society off oil, gas and coal in the near future, address neither the key facts behind energy growth, nor Smil’s insights about energy transitions. Many simply assume that we must or we will attain the greenhouse gas emissions targets set down at Kyoto or Rio or Paris because they are so important, without examining how this could actually be accomplished. In fact, there is no viable plan, anywhere in the world, to meet carbon emissions targets laid out in international climate agreements.
Respected science blogger Blair King (A Chemist in Langley) summarized this thinking succinctly:
“… That we could eliminate our reliance on fossil fuels in the next 10 years does not even rise to the level of laughable. It is simply magical thinking. If we undertake herculean efforts and dedicate a [huge proportion] of our gross domestic product to the task we have a reasonable chance of weaning ourselves off fossil fuels in 30-50 years.”
Next month in Part 2 of this series, I’ll examine society’s projected energy needs against climate change issues in more detail. In Part 3, I’ll come back to the oil and gas industry to examine how it must evolve to meet the needs of the future.