Last week British Petroleum (BP) released their annual report on world energy, and today' WrapUp will highlight the general trends in energy for oil, natural gas, coal, uranium, as well as regional patterns in consumption, with the emphasis on the U.S., China, India, and the Middle East. An in depth analysis on the surging energy demand from China, with highlights as to what was the likely catalyst that lead to China's increase in energy demand, as well as a comparison on the diverging importance of China and the U.S. on aggregate world energy demand will be presented in tomorrow's WrapUp.
Regional Consumption Patterns & 2006 Energy Consumption Growth
For the most part, oil remains the top energy fuel for the various regions of the world, coming in as the number one fuel in four of the six world regions. Oil represents just over 40% of North American primary energy consumption, 44.7% in South and Central America, 50.5% in the Middle East, 40.3% in Africa, and 31.5% in Asia Pacific.
The number one consumed fuel for Europe & Eurasia is natural gas at 34.1%, while coal represents 49.2% of Asia Pacific's energy demand. Of the six regions, Europe and Eurasia has the most diverse energy demand, with no single fuel accounting for more than 35% of total aggregate energy demand. The Middle East displays the least diverse energy demand profile, with oil representing 50.5% and natural gas representing 47% of total aggregate energy demand.
Figure 1
Source: BP Statistical Review of World Energy 2007
In terms of primary energy consumption, growth since 1965 is a great divide between industrialized and developing countries. Middle Eastern demand for primary energy consumption has risen 864%, 831% in China, 700% in India, while only 81% in the U.S. and 184% for total world energy demand.
Figure 2
Source: BP Statistical Review of World Energy 2007
Energy consumption growth has increased fairly steadily in India and the Middle East while it exploded in China starting in 2001 to 2002, which will be commented on tomorrow. From 1995 to 2006, Chinese demand has increased 85%, 66% for India, 63% for the Middle East, 27% for total world demand, and only 10% for the U.S.
Figure 3
Source: BP Statistical Review of World Energy 2007
In terms of world consumption share of primary energy, there is a clear declining trend in U.S. consumption share, falling from 33.6% in 1965 to 21.4% in 2006, while an increasing share coming from China, rising from 4.8% in 1965 to 15.6% in 2006, more than tripling its relative share in under a half century. The Middle East and India have more than doubled their share, with the Middle East rising from 1.5% to 5.1% in the same time frame, and India rising from 1.4% to 3.9%.
Figure 4
Source: BP Statistical Review of World Energy 2007
Primary energy component growth for 2006 rose for all five of the categories, with coal consumption rising the most, up 4.5%, while world oil consumption growth was only 0.7% last year. The main energy component categories are discussed below.
Figure 5
Source: BP Statistical Review of World Energy 2007
World Oil Consumption
No country compares to oil consumption growth over the last half century than China, with Chinese oil consumption growing by 3328% from 1965 to 2006. Indian growth is also quite large, growing by 917%, with the Middle East consumption growing by 519%. Total world oil consumption has grown by 168% since 1965, with U.S. growth coming in at only 79%, indicating our developed economic status.
Figure 6
Source: BP Statistical Review of World Energy 2007
In terms of oil consumption share of total world demand, the U.S. still consumes the lion's share, though her portion has shrunk, falling from 36.9% in 1965 to 24.6% last year. China's share has moved in the opposite direction, rising from less than 1% to 8.9%, with the Middle East increasing their consumption to 7.1%, with India consuming 3.1%. Not only is China emerging rapidly as a dominant consumer of world oil supplies, but the growing economic development in the Middle East, as seen by their rising share of world consumption, means more incremental oil production in the Middle East will be directed to their economies and less exports to the rest of the world.
Figure 7
Source: BP Statistical Review of World Energy 2007
In looking at 2006, global oil consumption grew by 0.7%, the weakest growth since 2001, with consumption growing by 600,000 barrels per day (bpd) to 83.7 million bpd. Chinese oil consumption grew by 6.7% last year while Organization for Economic Co-operation & Development (OECD) nations consumption declined by 400,000 bpd, marking the largest decline since 1983.
World Natural Gas Consumption
Since 1965, Indian consumption has grown by 17,434% (right scale, Figure 8) as consumption in the country was virtually non-existent in 1965 at 0.2 billion cubic meters, with the country consuming 39.7 billion cubic meters last year. Chinese natural gas consumption has risen by 6,155% with Middle Eastern consumption growing by 2,753%. Total world consumption grew by 335%, while U.S. consumption has grown only 43% since 1965.
Figure 8
Source: BP Statistical Review of World Energy 2007
With natural gas power plants virtually non-existent in the developing world in 1965, the U.S. consumed more than half of the world's total natural gas consumption. Things have changed since then as the U.S. has fallen from consuming 66% of total world consumption in 1965 to 21.7% currently. The Middle East has risen from 1.5% to more than 10% over the same time period, while the Chinese only represent 2.1% of total world consumption.
Figure 9
Source: BP Statistical Review of World Energy 2007
Last year world natural gas consumption grew by 2.5%, while U.S. and European Union (EU) consumption declined due to warmer winter weather, though this was offset by strong growth in Russia and China.
World natural gas production rose by 3% last year, with Russia accounting for the largest incremental growth, with U.S. production rebounding 2.3% after the hurricane-related outages in 2005. UK production fell by 8.6% last year, marking the sixth consecutive annual decline.
Transport of liquefied natural gas (LNG) rose by 11.8% last year, with Asian imports of LNG growing by 10%, while European imports surged 20%.
World Coal Consumption
Coal consumption for the Middle East since 1965 has risen 4,123%, though this is in part due to consumption being virtually non-existent in 1965. Chinese consumption has grown by 619% since 1965, Indian growth by 566%, and total world consumption by 109% and U.S. consumption by 94%.
Figure 10
Source: BP Statistical Review of World Energy 2007
In terms of share of world consumption, the U.S. has remained between 20% to 24% until declining this decade. China, on the other hand, has risen steadily in relative importance from 11.2% in 1965 to 38.6% last year, eclipsing the U.S. in world consumption in 1986. India has also increased in relative importance, rising from 2.4% of total consumption in 1965 to 7.7% last year.
Figure 11
Source: BP Statistical Review of World Energy 2007
Coal was the fastest-growing hydrocarbon fuel last year, with consumption growing by 4.5%. A significant portion of that growth came from China, whose consumption grew by 8.7% last year and accounted for 70% of the total consumption growth in 2006. Conversely, consumption in the U.S. declined for the first time since 2002.
World Nuclear Consumption
U.S. nuclear consumption has risen 21,431% from 1965 to 2006, while Europe & Eurasia consumption has risen by 5,739%, with total world consumption rising by 10,846%. In 1965, the only two nuclear generating regions were the U.S. and Europe & Eurasia, with Chinese and Indian demand non existent until the 1990s.
Figure 12
Source: BP Statistical Review of World Energy 2007
Since the 1994, Indian demand has increased 257% with Chinese demand surging 268%, while U.S. demand has risen 23% and Europe & Eurasia demand rising 21%. The surge in incremental growth coming from China and India has had a direct impact on uranium prices, with a surge in uranium prices that began in 2003, a year after the surge in Chinese demand in 2002.
Figure 13
Source: BP Statistical Review of World Energy 2007
In summary, the BP data shows that developing nations are rapidly growing their energy consumption, with the bulk of their energy consumption growth coming in the last ten years through the strong globalization taking place. As developing countries like China and India mobilize their population into manufacturing centers their energy needs have increased dramatically.
The modernization taking place in developing nations has put a strain not only on energy supplies but on commodities in general. This can be seen in rising commodity prices and falling stockpiles, which was shown in a series of charts in a previous WrapUp (Inflation Rearing Its Ugly Head? Secular Trend Implications, Figures 6-19).
The rise in energy consumption has shifted the relative importance of the U.S. as the main consumer of energy products as China takes an ever larger slice of the world energy pie. Looking at Figure 3 above shows a near vertical surge in Chinese primary energy consumption taking place starting in 2001-2002, and tomorrow's WrapUp will explore the likely catalyst that lead to the surge in Chinese energy demand and the resulting implications in the U.S.
TODAY'S MARKET
The markets opened lower in morning trading after the durable goods orders release showed orders falling 2.8% in May, though managed to stage a late afternoon rally into the close on takeover deals and strong earnings reports coming in from ConAgra Foods Inc. and Oracle Corp.
The Dow almost put in a triple-digit gain on the day, rising 90.07 points (+0.68%) to close at 13,427.73, while the S&P 500 rose 13.45 points (+0.90%) to close at 1506.34 and the NASDAQ closed at 2605.35, up 31.19 points (+1.21%).
Investors purchased Treasuries today with the 10-year note yield falling 3.1 basis points to help lift the markets, closing at 5.070%. The dollar index was up on the day, rising 0.01 points to close at 82.30. Advancing issues represented 72% and 66% for the NYSE and NASDAQ respectively, with up volume representing 79% and 83% of total volume on the NYSE and NASDAQ, reflecting a strong rally in the markets.
Energy prices rose after a strong bullish petroleum inventory release. West Texas Intermediate Crude (WTIC) rose more than a dollar a barrel (+1.77%) to close at .97 a barrel. Precious metals were up on the day with gold closing at 3.75/oz (+0.44%), with silver up __spamspan_img_placeholder__.05/oz to close at .29/oz (+0.37%). Base metals were down with lead putting in the strongest declining performance (-5.54%) followed by nickel (-3.95%), zinc (-3.05%), and copper (-2.09%).
Overseas markets were mixed on the day with the Chinese Shanghai index putting in the strongest performance (+2.65%), while other Asian and European markets were down with the Japanese Nikkei 225 index down the greatest, falling 1.20%.
The rally in the markets was broad based as all ten of the S&P 500 sectors were up on the day, with energy leading the pack (+1.52%) followed closely by the utility sector (+1.43%) and technology (+1.21%). The weakest sectors on the day were materials (+0.44%) and industrials (+0.45%).
