Each year, British Petroleum publishes statistics about energy production and consumption in every country. These statistics are an authority because of their accuracy and they allow us to confront political messages with reality in these highly important issues. The 2017 publication is especially interesting since it occurs in a troubled environment caused the retreat from the Paris Agreement decided by Donald Trump and just after the extension of the OPEC deal about the limitation of oil production by State members. The BP report brings elements of answers to these many questions which are on debate, especially in France.
The first one is related to the persisting abundance of resources. Production and consumption of fossil fuels growth went on in 2016, with the exception of coal. In particular, prices fall only slowed the exploitation of both shale oil and natural gas in the United States. In this country, between 2007 and 2016, oil production jumped from 6.8 to 12.4 million barrels per day with a small decline in 2016 after the 2015 peak when it reached 12.8 mb/d. The price fall occurred in the second half of 2014 has had few impact on the new American producers who have learnt how to adapt themselves in reducing their extraction costs and in increasing the flexibility of their rigs. It is very costly to stop the operations of an oil off-shore platform but rigs operating on a shale oil field can react very quickly to market conditions. Since few months anyway, we note a rebound of the number of rigs and American production could, in 2017, overpass the 2015 peak.
OPEC agreement didn’t block any further the increase of the production in the Middle East with Iraq (+11%) and Iran (+18%), and also Saudi Arabia and Gulf states which were not left out. In the world, only three major countries, Mexico, China and Nigeria had a significant fall of their production when others African nations, and especially Libya, did not return to the level they had in the past. Oil consumption grew with the same rhythm, but with important disparities among the countries due to their economic situation. Profitable production capacities with an oil price around 50$ per barrel are largely enough to meet demand on the midterm and initial OPEC calculus which targeted a fall of shale oil production to get a rebound of oil prices has failed. Demand growth will be, in the future between 0 and 2%, the consumption fall in developed countries being compensated by new demand coming from emerging countries like India and China. So there is much less uncertainties regarding the future of oil markets than it is usually thought.
On the opposite to oil, natural gas production and consumption strongly increased due to the combined impact of the supply abundance thanks to shale gas revolution in the U.S., of the coming into service of large new off-shore fields in the Asia-Pacific area and of the construction of new pipelines in Europe and providing connections to China. American production increased by 43% in ten years, i.e. almost twist as fast as the world production, thanks to the shale revolution, even if it slightly fell in 2016. In Europe, during the same period, production staid flat, especially in Russia, the fall registered in United Kingdom and in Netherlands being offset by the increase of the Norwegian production. In the Middle East, as in Australia, it is strongly rising. Consumption significantly increased in the U.S. and took off in China, where, during a ten years period, it went from 60 to 210 bnm3. It is hardly starting in India because the country has not yet the infrastructures to supply it. At the end, it is on the rise in Japan because the country has to cope with the stopping of its nuclear power plants. It is the prices fall, thanks the abundance of the supply, which is at the origin of these very significant moves. The progress realized in liquefaction and transport techniques have also supported natural gas supply in areas which did not have access to it before.
The most important consequence was the reduction of coal use because power utilities in the U.S., and, on a less brutal way in China, moved to natural gas to take advantage of lower costs. Between 2010 and 2016, coal consumption fell by more than 30% in the U.S. and its growth has been stopped in China. As a consequence, coal production in the U.S. has fallen in five years by almost 40%, and in China, it returned to the 2010 level, which is not without creating social problems in some provinces. It is stagnating in Europe because half of production is located in Germany and in Poland, which continue to favor that energy, and it is still increasing in India and in Southeast Asia, especially in Indonesia.
These major trends provide a much better explanation than international conferences or political addresses regarding the evolution of worldwide CO2 emissions, about which the BP report gives valuable information. Gasoline consumption fall in developed countries, due to technical innovations proposed by the car industry, has had a positive impact. But it is the transfer from coal to natural gas in power generation which has been the main cause of emissions stabilization since 2013, along with renewable energies development. American emissions fell by 16% in ten years and China, which represents 27% of total emissions, has succeeded in stabilizing its own, despite a growth rate which is still high. Europe is less virtuous because it has strong disparities. France and United Kingdom significantly reduced their emissions when Germany and Poland, only reduced their own ones by 10%, i.e. twice less than the European average, due to their persistent utilization of coal. Asia, without China, stays as the last area where emissions are growing. Emerging countries like India and Indonesia are still increasing their own ones. Developed countries, like Taiwan and South Korea, where fossil resources are abundant, are not doing any effort to reduce their own emissions.
The panorama described by the BP report contains two lessons. The first one is that innovation is at the origin of the major changes in the trends. Some thought that fossil fuels resources were limited and that the production would reach a “peak”. The new technologies used to extract fossil fuels gave a blow to these assertions. The second lesson is that fossil fuels as a whole are not the enemy of the policies fighting against climate change and pollution in the large cities but a precious ally under the conditions that one of them, coal, is abandoned, that we continue to innovate in transportation activities and that the use of diesel is not anymore encouraged through fiscal incentives. It is what the policies followed in the U.S. and in China prove. The priority, for tomorrow, is the adoption in Europe of a higher carbon price and, in the emerging countries, of consistent strategies based on a mix of renewable, by definition intermittent, and gas power plants. To achieve that, the development of infrastructures dedicated to supply natural gas to these countries should be a priority for the planet.