January 04, 2021

Top Movers in Energy Demand: 2019-2030

Stratas Advisors

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Supported by a projected post-pandemic (2023-2030) average annual real GDP growth rate of 2.8% and average population growth rate in the same period of 0.9%, global primary energy demand is expected to grow by over 50 quads (8%+) by 2030 versus 2019 levels.  This is strongly underpinned by energy demand growth in China and India, which together account for close to 30 quads of demand growth (virtually half of total non-OECD primary energy demand growth).  Non-OECD growth is counteracted by demand declines in the OECD, which falls by nearly 8 quads by 2030.  A significant factor in the US' demand decline is the replacement of coal by natural gas in the power generation sector, with natural gas turbines being significantly more efficient in electricity generated per unit of fuel input, resulting in lowered primary energy consumption (while maintaining steady volumes of power generation).

 

 

Power demand growth is centered around some of the largest emerging markets, with Chinese growth easily outpacing the rest as it experiences a rapid rate of development and income growth.  Vietnam's growth is strongly underpinned by its growing industrial demand as it expands its manufacturing base as a regional alternative to China's.  Chinese power demand growth is also driven by industrial growth, but some of this is a function of the need to replace coal usage in the industrial sector, and the rate of growth from industry is expected to level off considerably by 2030.

 

 

Oil products account for 9.8 quads of energy demand growth (about 5.7 million bbl/d in volume terms) in China and India combined, or approximately one-third of their collective primary energy demand increase by 2030. As with primary energy, China's oil product demand growth exceeds India's by close to a 2-to-1 ratio, though the latter sees a significantly higher growth rate.  Saudi Arabia follows India at a distant 3rd, with 670 thousand bbl/d of demand growth, comprised primarily of gasoil, ethane, and other light products.  The US and Japan lead the largest declines, followed by three of the 5 largest European markets.

 

 

Breaking the movements down further into road volumes consumed by major vehicle categories can reveal more interesting insights, with the figure below showing growth volumes for road diesel used by light-duty vehicles (LDVs).  Predictably, the largest declines are the "big 5" European markets, with France leading by a significant margin.  The top five growth volumes reflect markets where diesel LDVs see some of the strongest growth levels (though not necessarily dieselization), led by Turkey and Brazil.  Overall, global diesel demand in LDVs is expected to fall by over half a million barrels per day by 2030 as many markets become wary of the fuel following the diesel emissions scandals.

 

 

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Stratas Advisors Forecast Models - Client Access

 

This analysis was developed using Stratas Advisors' proprietary Automotive Interactive Model (AIM) and Energy Demand Model.  Stratas Advisors licenses these models to clients, who use them to generate forecasts and sensitivities based on their own assumptions across the full range of input variables, from price to fundamental drivers and behavioral assumptions.

The AIM model forecasts light-, medium-, and heavy-duty vehicle sales and fleet volumes by powertrain by using projections of total cost of ownership, regulatory incentives, scrappage curves, and major macro-level drivers at the country level.

 

The outputs from the AIM model, along with other macro-level drivers, are used in the Energy Demand Model, which forecasts global energy demand for 38 energy types at the sector-level within countries (124 countries broken out, each further subdivided into 21 economic sectors). The model uses statistical relationships between key drivers and sector-level energy demand, along with price relationships and regulatory constraints, to create a comprehensive energy consumption forecast. Vehicle outputs from the AIM model are primary inputs to the Energy Demand Model’s road sector demand forecast, supporting fuel demand modeling broken down for 20 light- and heavy-duty vehicle types. Both models include Stratas Advisors’ baseline assumptions and forecasts, and are highly customizable.

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