This is a Listen Up! guest post by Dave Wilkin
This second article in the Our Energy Future series explores the global energy big picture.
My attached chart shows 30 years of global energy history, including a 2021 projection. The energy mix coloured stack (left axis, measured in exajoules) and related key trend lines shown provides some important insights. Note that BP’s primary energy data shown is for commercially traded fuels only and non-fossil fuel energy incorporates an ‘energy-equivalency’ 2.5-times factor uplift for a fairer comparisons to fossil fuels. Growth rates referenced are 20-year annual averages (CAGR’s).
First, note that all primary energy grew at two per cent, pushing Energy Intensity (GJ per capita is shown) up about one per cent annually, driven entirely by developing countries’ rapidly expanding middle-class and fast-growing economies (China and India led). Energy efficiency improvements were made, but they were overwhelmed by economic and population growth, so energy and fossil fuel consumption continued to climb.
Looking next at the energy mix, we see fossil fuels remained dominant with an 84 per cent share, down a modest two per cent over the past two decades, leaving Carbon Intensity flat (CO2 emissions per capita is shown). Fossil fuels grew at two per cent, driven entirely by non-OECD (i.e. less wealthy) countries growing at double that, while OECD countries remained flat. Hydro power’s modest growth was offset by nuclear power decline, despite significant Asian growth in both. The renewables share expanded to a modest six per cent, two-thirds of which came from wind and solar power, led by Europe and China.
Oil demand grew at about 1.2 per cent, but more notably, every year three to five per cent of production is lost from conventional oil field natural reservoir declines and coupled with slowing exploration/development, has reduced conventional oil lifespans. This combined with growing demand led to the rapid rise of unconventional oil, doubling in share over 15 years. US shale oil and Canadian oil sands (16 per cent and five per cent global oil share respectively in 2019) led this growth.
It’s important to know that recessions have tended to follow major oil price increases, showing how closely linked energy and the economy are. However, a recession didn’t follow the mid-last decade’s large oil price spike. This was due to central banks’ monetary policies which kept real interest rates at zero/negative while injecting over $25 trillion (i.e. ‘quantitative easing’) into the global economy since the 2008 financial crisis. It continues to this day. These unusual banking policies led to global gross debt/GDP growing over 60 per cent in twelve years, to reach a stunning 355 per cent last year. This meant a significant amount of the economic growth over the period was debt, not productivity fueled. Concerningly, Canada has an even higher gross debt to GDP ratio and a lagging productivity growth outlook compared to OECD countries.
Now note the 2021 projections. With economic growth returning, past energy trends have returned. Global oil prices have surged, with Brent Crude briefly passing $85 per barrel as global demand approaches the 100 million barrels/day mark again. One-hundred-dollar-a-barrel-plus oil next year looks very possible. Similarly, natural gas and coal demand has returned, and prices have rocketed up in most countries, especially in Europe. The ‘Great Reset’ some global elites and politicians called for (including our PM) appears nowhere in sight.
What has changed though is many Western governments’ war on fossil fuels has taken its toll, leading to significant upstream oil and gas investment reductions, triggering today’s supply-demand crunch. Strategically, this benefits OPEC and members most, as they remain immune to environmental activism, ESG investor pressures and they retain their governments’ strong support. But they can’t fully meet global demand, given production capacity limitations. Oddly, despite Europe’s energy crisis, even clean nuclear power is not immune to irrational environmental policies, as Germany and Belgium are demonstrating as they continue closing their remaining nuclear power stations.
So what to make of all of this? What is becoming clear is 2022 is shaping up for even higher prices. It’s looking like a structural global energy crisis has arrived, bringing with it persistently high energy prices and inflation. With interest rate hikes looming, on top of high and still-rising global debt levels, the stage is now set for more turmoil. Geopolitics further complicates things (e.g. Ukrainian – Russian conflict and the energy crisis gripping Europe, China’s even closer ties with energy-superpower Russia).
This is certainly not a good position to be in when faced with the enormous costs associated with a chaotic energy transition. Other high-priority needs, like aging infrastructure, health care, and poverty must not become casualties.
Rapidly upending these deeply embedded historic trends, attempting to cut fossil fuel use in half in under eight years and to near-zero in under 30 years, is not only irrational but extremely dangerous. It will lead to more inequity, social unrest and conflict, while undermining the clean-energy transition sought.
There are far better, more rational paths forward than the one many European countries and Canada are currently on. A future article will examine this picture more closely and consider what may lie ahead. Please watch for it!
Dave Wilkin is a Professional Engineer, with a master’s degree in Electrical Engineering from the University of Toronto. His career spans 45 years in IT, banking, energy and consulting and is a co-owner in a small energy consulting company. He lives in Huntsville, Ontario.
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Oliver Klimek says
Thank you for your commentary, Mr. Wilkin (may I call you Dave?)
You include a lot of good information in your article, but you make two errors in your conclusion. You state: “attempting to cut fossil fuel use in half in under eight years and to near-zero in under 30 years, is not only irrational but extremely dangerous”.
The first error is that the goal set by the Intergovernmental Panel on Climate Change (IPCC) is not to cut fossil fuel use by half, it is to cut greenhouse gas (GHG) emissions in half.The burning of fossil fuels for energy is the single biggest contributor to global warming, but we must reduce GHG emissions from all sources if we hope to limit global warming and mitigate climate change.
Your second error is more serious. The IPCC goal to cut emissions is not “irrational”: it is the globally recognized minimum standard necessary to limit global warming to 1.5C. This goal is not “irrational”, and neither is it “dangerous”. The danger lies in a failure to act. If we do not strive for, and then reach the IPCC goal, the damage to life will be unprecedented, and in some cases it may be impossible to recover what it lost.
I agree with your call for a rational and orderly energy transition, but if we do not cut our emissions in half in eight years we stand to lose more than we can ever imagine.
HUGH HOLLAND says
Dave, I must agree with Oliver Klimek. The international goal agreed to by thousands of the world’s best experts is neither irrational nor dangerous. The opposite is true. Every gasoline-burning vehicle on the planet will normally be replaced twice between now and 2050. Every energy producing device and every energy using device will be replaced on the normal 25 to 30-year cycle. The incremental cost of replacing old tech with new tech is significant but affordable. The opportunities we now understand are enormous. There will be some mainly political bumps on the road, but most industries and countries including India and China know what to do and are already making great progress. We are at the inflection point on the acceleration curve. We don’t need more hopeless politically motivated predictions piled on top of what we already have. People need to know that our grandchildren can indeed have a liveable life, if their grandparents (that’s you and I ) don’t screw it up.
Brian Samuell says
This article is based on this year’s publication of the BP Stats Review 2021. The chart that accompanies it shows 30 years of global energy production, that is from 1990 thru 2020. The author concludes from this that eliminating the fossil fuel in 30 years and cutting it back on it’s use by 50% within five years is “extremely dangerous”. It will lead to more inequity, social unrest and conflict and it will undermine the change to clean energy he states.
BP Stats Review is just another product produced by what was formerly known as British Petroleum. In 2010 BP also gave the world the Deepwater Horizon oil-rig disaster which the stock value still hasn’t recovered from. It seems that it thinks it best to paint a rosy picture showing the need for the world to continue to pollute and change the world weather for our children and theirs.
Rather the vested interests economically attached to the status quo need to be listened to as fundamentally biased and resistant to change. The world has to reform quickly or the world will change in a runaway manner far more dangerous than it is currently.
My children and my children’s children have to live in the world we give them, they are the ones that have to see the changes made and accomplished. That won’t happen during the lifetimes of all the old men that are claiming it can’t be done today. I hope that they very very quickly take over the political parties and the world business economies and get to work fixing what we dither on and say can’t be done.
Dave Wilkin says
I want to commend the Huntsville Doppler for their willingness to publish articles on important, complex & often controversial topics. Very few local media outlets are willing to do so. Canadians have so much at stake in the future of energy so please share the articles & keep the comments coming!
A future article I am planning will take a closer look at what’s going on in both Europe, who has exhibited stunningly poor energy planning, and in the developing (i.e. non-OECD) countries, most notably China who is playing both the fossil fuel and green renewables sides of the energy transition very smartly. They have & continue to out-position both the EU and the US. Canada could be a leader and a big winner .. but not on the paths our governments are currently taking.
The geopolitical stakes are very high and most interesting!
Dave Wilkin says
Brian Samuell, thanks for your comment.
Please note that BP’s energy data is not biased, as you seem to be suggesting. It is the most comprehensive, widely used and highly regarded publicly available energy data available today. It is used by many writers, energy businesses, industry experts, and governments. This year is the 70th year they have published their review & database. I encourage you to read the report if you are interested in energy:
https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/statistical-review/bp-stats-review-2021-full-report.pdf
I have been watching and working with energy data for years, and have checked for consistently many times with other data sources (most are less detailed, and not all of them free to the public). My other sources includes the International Energy Agency (IEA), the U.S. Energy Information Administration (EIA) , ExxonMobil and some of the largest global consultancies that have an energy focus, including Wood Mackenzie, McKinsey & Company and Rystad Energy. I have never found any significant inconsistencies with BP’s historical data. There is a range of differing views on the future of energy, as one would expect. If you don’t believe me, look up the data available from any of these highly credible sources and you will reach the same conclusion as I, very high consistency on the historical data.
Regarding your comment about BP having “vested interests economically attached to the status quo”, it’s just not accurate. BP has pivoted to become a leader among the big energy companies in the transition from oil to renewables. This recent REUTERS report details this and the risks they are taking. It’s worth a read:
https://www.reuters.com/business/sustainable-business/bp-gambles-big-fast-transition-oil-renewables-2021-09-20/#:~:text=BP%20moved%20aggressively%20into%20offshore,Coast%20for%20about%20%241%20billion.
I would be happy to answer any other questions you may have.
Dave Wilkin says
Thanks for your comment Oliver. Yes, you can call me Dave.
Indeed the IPCC goal is to cut emissions in half by 2030 and then to ‘net-zero’ by 2050. If you read more carefully about how that should be accomplished, overwhelmingly they want it done by replacing fossil fuels with clean renewables, like wind and solar power.
Much has been written about technologies like carbon capture, utilization and storage (CCUS). Some claim it is little more than ‘green-washing’ as it justifies continuing to burn fossil fuels. There is some truth to that, and the reality today is that the technology is evolving, expensive, and has very little uptake. However it does in my view, and that of the IEA and many other organizations, have a role to play. It’s just that the role will be minimal in the next decade, perhaps much longer, given its costs and technical challenges. Applying it retroactively to existing power stations, coal in particular, is prohibitively costly. For new power stations it adds 50% or more to the upfront capital cost as well as significant long term operating costs increases, driving its LCOE much higher. Thus why none of the roughly 200 coal powered stations under construction globally (China is building most of them) has CCUS planned. Direct air capture is even further behind.
If you look at Europe, which is the biggest driver in the IPPC today (and the IEA of late too), outside of Norway (which has Europe’s’ biggest oil and gas sector by far and so has a highly vested interest in CCUS to help meet their recent ‘net-zero’ pledges), all their focus is on replacing fossil fuels. Their reasoning is obvious, Europe is highly energy insecure, and being dependent on Russia for almost half their oil and gas (and about a third of all their primary energy consumed) is not a good place to be. The current Ukraine crisis makes this quite clear.
Thus why I said what I said on the targets.
I also know about 74% of all emissions globally comes from fuel combustion, so it’s most focus for GHG reductions. The remaining emissions are likely even harder to eliminate, especially from agriculture/land use, which is about 18%.
My overall message here is straight forward – the current targets are impossible to achieve without wrecking economies and destabilizing the world. Europe is learning this the hard way by placing too much faith in wind and solar with its severe limitations to broadly displace fossil fuels, then failing to plan accordingly. I never said reducing emissions was irrational, it clearly isn’t. Just chasing impossible targets is.
Sorry for the long answer, it’s an important point you raise, so I wanted to clarify my positions.
Oliver Klimek says
Hi Dave…thanks for the detailed response.
In your conclusion you write: “My overall message here is straight forward – the current targets are impossible to achieve without wrecking economies and destabilizing the world”.
I understand your point, but I must disagree.
First, we can reach the targets, and we can reach them without catastrophic consequences. A chaotic energy transition could lead to economic and/or social catastrophe, but this is not inevitable. If we are willing to change our expectations (e.g. energy should be clean, and we should pay the true cost of producing it) and if we are willing to change our behaviour (e.g. limit our use of energy and use it more efficiently) there is no reason we cannot cut our emissions in half by 2030. I know, because I have already done it.
Second, if we do not reach our targets, a stable economy will be the least of our worries. The goal is clear. If we do not limit global warming to well below 2C, it is impossible to fully predict the extent and severity of the consequences to life on earth.
Dave Wilkin says
Thanks Oliver. Good for you to reduce your footprint. All Canadians, if they can afford it, should do the same. Efficiency improvements are no-brainers, and they save money and help the economy. With high and rising energy costs it makes even more sense.
However, the big mistake many wealthy countries are making is curtailing fossil fuels before viable, affordable alternatives (at scale) are available. The EU is furthest along the green energy transition path, roughly 25%, and has hit this wall. They are well-off and have been at it for decades.
Non-OECD countries, home to 84% of the world’s population, have less than a quarter the GDP/person vs. the EU & generate about 2/3 of global emissions today, and are only about 12% down the green energy path. In 40 years they will have 90% of the global population and likely another 4 billion middle class people (more than doubling the middle-class size globally). They can’t afford to follow the EU’s path and won’t until something big changes, COP26 (non-agreements) underscored this. So wealthy countries struggle themselves and they can’t/won’t commit the big $$ needed to materially help poorer countries. Thus global emissions continue to rise.
I plan a future article to look at the scope of costs. Got to know costs, otherwise no chance of getting there.