Four Major Forces Reshaping Global Energy System

(December 6, 2017) — The resurgence in oil and gas production in the U.S., deep declines in the cost of renewables, and growing electrification are changing the face of the global energy system and upending traditional ways of meeting energy demand, according to the International Energy Agency’s (IEA) World Energy Outlook 2017. A cleaner, more diversified energy mix in China is another major driver of this transformation.

IEA forecasts that, over the next 25 years, the world’s energy needs are met first by renewables and natural gas, as fast-declining costs turn solar power into the cheapest source of new electricity generation. Global energy demand is 30% higher by 2040, but still half as much as it would have been without efficiency improvements. The boom years for coal are over—in the absence of large-scale carbon capture, utilization, and storage—and rising oil demand slows down but is not reversed before 2040, even as electric-car sales rise steeply.

The latest

, IEA’s flagship publication, finds that over the next two decades the global energy system is being reshaped by four major forces: the U.S. is set to become the undisputed global oil and gas leader; renewables are being deployed rapidly thanks to falling costs; the share of electricity in the energy mix is growing; and China’s new economic strategy takes it on a cleaner growth path, with implications for global energy markets.

This year’s

includes a special focus on China, where economic and energy policy changes under way will have a profound impact on the country’s energy mix, and continue to shape global trends. A new phase in the nation’s development results in an economy that is less reliant on heavy industry and coal.

The shale oil and gas revolution in the U.S. continues thanks to the remarkable ability of producers to unlock new resources in a cost-effective way. By the mid-2020s, the U.S. is projected to become the world’s largest LNG exporter and a net oil exporter by the end of that decade. This is having a major impact on oil and gas markets, challenging incumbent suppliers and provoking a major reorientation of global trade flows, with consumers in Asia accounting for more than 70% of global oil and gas imports by 2040. LNG from the U.S. is also accelerating a major structural shift toward a more flexible and globalized gas market.

The

report asserts it is too early to write the obituary of oil. Global oil demand continues to grow through 2040, although at a steadily decreasing pace. And over the period, fuel efficiency and rising electrification results in a peak for oil used to fuel passenger cars, even with a doubling of the fleet to 2 billion. But other sectors, namely petrochemicals, trucks, aviation, and shipping, drive up oil demand to 105 MMbbld by 2040.

(SOURCE:

, December 4, 2017)