Putting the Covid oil crash in context

2020 marked a mere blip on humanity’s meteoric rise in energy demand

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The 2020 lockdown-induced crash in energy demand must be considered against the wider trend of unstoppable demand growth. Ensuring a ‘just’ transition means advanced economies must decarbonise quickly enough to allow for some fossil-fuelled development in the global South, while keeping emissions within planetary safe boundaries. And as Covid-19 reminds us, this must be a painless experience for the majority of the world’s 7.8 billion people – otherwise decarbonisation won’t happen at all.

Modern human civilisation is an energy-intensive phenomenon. And its degree of intensity is on a firm march northwards.

Since 1970, the global population has roughly doubled from 3.7 billion people to 7.8 billion as of last year. But primary energy consumption has almost tripled from 204 exajoules to 557 exajoules over the same period.

That’s according to BP’s Statistical Review of World Energy 2021, which celebrated its 70th anniversary last week.

This was a notable edition, and not just for the septuagenarian milestone. The report lays bare, in granular detail, the profound shock of the first waves of Covid-19 lockdowns on global patterns of energy demand, trade and production.

Per-capita energy consumption fell 5.5% compared to 2019, as global demand fell more steeply than at any point since the Second World War. But when considered in a 50-year context, our collective consumption of energy shows absolutely no signs of abating.

Since 1970, per capita energy consumption has grown by one-third: from 55.2 gigajoules to 71.4 gigajoules last year. In terms of barrels of oil-equivalent, that’s an increase from 9 boe to 11.7 boe per person.

And with energy demand roaring back in 2021, the Covid crash could be recorded in future Statistical Review editions as a mere blip on an otherwise meteoric upward trajectory of energy consumption.

There could be 10 billion human beings living and breathing on planet Earth by 2050. Even if per-capita consumption miraculously remains flat, total primary energy demand would still hit a staggering 714 exajoules. That’s the energy equivalent of 116 billion barrels of oil, every year, and rising.

Of course, much of this demand won’t be met by oil, or indeed any fossil fuel. But the painful reality is that meeting this astronomical level of demand will be hard enough even with unfettered mining and drilling to develop new coal, oil and gas reserves.

It will be that much harder to satisfy if fossil fuel production enters swift and terminal decline, as it must if the vital goals of the Paris agreement are to be achieved.

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More energy ≠ more wellbeing

Global averages can be dangerously misleading. People in some developed countries are already consuming way more than the projected 2050 per capita figure mentioned above. Many more in the developing world are yet to attain 1970 levels of energy access.

In Qatar, Singapore and Iceland, the average person last year consumed almost an order of magnitude more than the 2020 global average. And across sub-Saharan Africa, per-capita energy consumption is more than an order of magnitude less than the global average of 50 years ago.

It is worth considering that a major portion of projected population growth over the next 30 years will come from energy-starved countries. Take for example Nigeria, where the population is expected to double by 2050.

Despite being a major exporter of oil and gas to some of the world’s most energy-profligate Western nations, Nigerians consume so little energy domestically that their country does not merit its own line in BP’s primary energy consumption table.

BP groups Nigeria in with ‘Western Africa’, where per-capita consumption in 2020 was a measly 6.6 gigajoules (up from 2.5 gigajoules per person in 1970). Yet the country features prominently in other tables in the report as a major oil and gas producer. This speaks volumes.

As industrialised nations re-open and burn through more carbon-intensive fuels, the debate rages over how to curb this consumption without crashing economies. There is less discussion about the millions of people across the developing world who are foregoing fuels extracted from their lands to keep Western economies afloat.

But don’t be mistaken: the intention of presenting these facts is not to argue for ever-greater fossil fuel production (and subsidies) to lift the developing world out of poverty, as Big Oil bosses love to do.

Indeed, as previously explored in Energy Flux, increasing energy consumption can drive exponential economic growth while making scant difference to human wellbeing.

Nigeria’s paradoxical situation is a case in point. The country has experienced runaway economic growth but endures some of the lowest human development indicators on the planet.

Nigeria’s GDP spiked from $70 billion in 2000 to $432 billion in 2020. But the country’s human development index (HDI) score – a UN-backed measure of longevity, access to knowledge and standard of living – has barely risen since records began in 2005.

Any country where population growth outstrips its HDI improvement rate is condemned to push its people into poverty, regardless of how much energy it consumes. Without systemic change, the developing world could be flooded with cheap fossil fuels over the next 30 years and still not attain 2020 levels of Western wellbeing.

The Covid dress rehearsal

There is a silver lining: BP’s figures reveal some levelling-up is happening on a macro level. Over 2009-19, per-capita energy consumption rose 1.8% in non-OECD countries, while it fell slightly in OECD countries and the European Union.

Over a longer period, the improvement is more apparent. Since 1970, per-capita energy consumption almost doubled across Africa and Latin America, and increased four-fold across Asia-Pacific and the Middle East.

The opposite is happening in the West. Last year’s Covid shock plunged European per-capita energy consumption below 1970 levels (to 113 gigajoules per person), while the average energy consumption of US citizens peaked in 1979 at 341 gigajoules. Last year it fell 8.3% to 256 gigajoules.

The colossal challenge facing world leaders and policymakers is how to accelerate that levelling-up while improving how energy is used and distributed in poorer nations such that it delivers meaningful improvements in people’s lives.

And all of this needs to happen against a wider backdrop of falling global greenhouse gas emissions.

There are tentative reasons to be hopeful. As BP chief economist Spencer Dale noted in his opening remarks to the Statistical Review, the carbon intensity of the energy mix – the average carbon emitted per unit of energy ‎used – fell by 1.8%, also one of the largest ever falls in post-war history:

“Last year’s fall in carbon emissions was obviously driven by a huge loss in economic output and activity. A ‎simple calculation comparing the fall in emissions with the decline in world output equates to an implied ‎carbon price of almost $1400 per tonne. Scarily high. The challenge is to reduce emissions without causing ‎massive disruption and damage to everyday lives and livelihoods.”‎

The good news is that this figure – $1,400/tonne – comes in below the estimate of $2,424/tonne calculated by Energy Flux at the height of the pandemic. And it remains far below the International Energy Agency’s $6,000/tonne figure modelled in a scenario in its World Energy Outlook 2020.

This is crucially important, lest we forget the abject misery that people all over the world endured while the world economy and emissions briefly went into freefall.

Cutting emissions must be a painless exercise for the vast majority of people in the developed and developing world, otherwise it simply won’t happen. And those reductions must come at a pace and velocity that allows some headroom for an appropriate amount of fossil-fuelled development in the global South.

Seb Kennedy | Energy Flux | 12th July 2021

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