Growth in Asia to keep de­mand for fos­sil fu­els high

U.S., Aus­tralia to ben­e­fit as sup­pli­ers

The Washington Times Daily - - Business - BY MATTHEW LOUNS­BERRY THE WASH­ING­TON TIMES

De­spite the re­cent buzz over re­new­able fuel sources such as wind and so­lar power, fos­sil fu­els will still be the globe’s dom­i­nant en­ergy source for decades to come, ac­cord­ing to a ma­jor new mar­ket sur­vey re­leased Tues­day.

And the move in many in­dus­trial pow­ers to cleaner sources of fuel is be­ing off­set by the con­tin­ued re­liance on fos­sil fu­els in much of the rest of the world.

In North Amer­ica, Aus­tralia and much of Europe, ac­cord­ing to the new 2013 World En­ergy Re­port put out by the Paris-based In­ter­na­tional En­ergy Agency (IAE), the mar­ket share of fos­sil fu­els such as nat­u­ral gas, oil and coal will fall from 68 per­cent in 2011 to 57 per­cent in 2035.

How­ever, be­cause of the in­crease in de­mand in de­vel­op­ing coun­tries led by China and In­dia, the cur­rent de­mand of fos­sil fu­els, at 82 per­cent of all fuel sources, is the same as it was 25 years ago. With high de­mand from the de­vel­op­ing world for con­ven­tional fos­sil fu­els, re­new­able en­ergy sources are only ex­pected to re­duce the de­mand for gas, coal and oil to about a 75 per­cent mar­ket share in 2035.

“Coal re­mains the largest source of gen­er­a­tion, with strong growth in nonOECD coun­tries far out­weigh­ing re­duc­tions in OECD coun­tries,” the re­port says.

There are signs of im­prove­ment in re­new­able en­ergy how­ever, as the share of re­new­ables in to­tal power gen­er­a­tion is pro­jected to rise from 20 per­cent in 2011 to 31 per­cent in 2035.

Asia’s surg­ing en­ergy de­mand will have a mas­sive trans­for­ma­tive im­pact on world en­ergy mar­kets, par­tic­u­larly in Aus­tralia and the United States.

Asia will “need ev­ery bit of Aus­tralia’s en­ergy ex­ports … coal, gas and maybe even ura­nium,’’ Fatih Birol, chief econ­o­mist for the IEA, said at the news brief­ing ac­com­pa­ny­ing the re­port’s launch. “I see a golden age for the Aus­tralian econ­omy to come, look­ing at the ex­port vol­umes … and the prices we ex­pect.’’

The United States, mean­while, is ex­pected to be­come the top sup­plier of nat­u­ral gas and elec­tric­ity to South­east Asia, out­pac­ing ri­vals in Europe and Ja­pan. Nat­u­ral gas in the U.S. trades at one-third of im­port prices to Europe and one-fifth to those in Ja­pan, giv­ing U.S. producers a sig­nif­i­cant ad­van­tage.

“The United States, which ex­pe­ri­ences rel­a­tively low en­ergy prices, sees a slight in­crease in its share of global ex­ports of en­ergy-in­ten­sive goods, pro­vid­ing the clear­est in­di­ca­tion of the link be­tween rel­a­tively low en­ergy prices and the in­dus­trial out­look,” said IEA Ex­ec­u­tive Di­rec­tor Maria van der Ho­even.

The avail­abil­ity and af­ford­abil­ity of en­ergy will play a crit­i­cal role in in­come growth and in­dus­trial com­pet­i­tive­ness for the ma­jor economies in the decades to come, and the frack­ing nat­u­ral gas boom in the United States has al­ready rewrit­ten global en­ergy flows.

“Lower en­ergy prices in the United States mean that it is well-placed to reap an eco­nomic ad­van­tage, while higher costs for en­ergy-in­ten­sive in­dus­tries in Europe and Ja­pan are set to be a heavy bur­den,” Mr. Birol said.

The en­ergy econ­omy in Brazil is also ex­pected to boom in the com­ing years, pro­vided Brasilia con­tin­ues to in­vest heav­ily in the sec­tor.

“Brazil’s en­ergy sec­tor un­der­goes a huge ex­pan­sion be­tween now and 2035,” ac­cord­ing to the re­port. “Its re­sources are abun­dant and di­verse and their de­vel­op­ment over the com­ing decades moves the coun­try into the top ranks of global en­ergy producers.”

Even with all the changes in global en­ergy flows, the Mid­dle East will con­tinue to be the world’s only large source of low-cost oil, and is ex­pected to be the key source of oil sup­ply growth in the mid-2020s, the IAE an­a­lysts said.

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