Another Day... Another View Of Energy Consumption And Population Growth

by: Christopher Hamilton

From 2013 through 2016 (the most recent data from the EIA), growth in global energy consumption has tanked. Seems worth a bit of discussion and a quick search for a cause. I'll use Primary Energy Consumption data, as this measures the total energy demand of a country, or in the chart below, the world. It covers consumption of the energy sector itself, losses during transformation (for example, from oil or gas into electricity) and distribution of energy, and the final consumption by end users.

Total primary energy consumption is about the best proxy of actual changes in economic activity I know of. Of course, some amount of decelerating demand should be due to conservation, innovation, and/or greater efficiency. But what I will detail is no conservation effort or higher efficiency... it is a massive deceleration in demand that given the central bank "support", ZIRP policies, and massive debt undertaken should have been resulting in epic growth. But, actually, not so much, and this should be of huge concern as the "supports" have been reduced since 2016.

First, the changing consumption, by energy type, since 2000 (chart below). While petroleum, natural gas, and nuclear/renewable demand continues essentially unabated, highly noteworthy is the surge in coal consumption from '00 to '13 and the declines since '13.

But the next chart details the decelerating total average change in demand, by energy type and total over the different periods. The relatively meager demand growth during the most recent period is staggering. While the growth in demand for petroleum and nuclear/renewable is marginally above previous periods, growth in natural gas demand fell over 50% (still growth, just half as much growth as the previous period), and of course, total coal demand outright declined over 6%. If global energy demand were growing anything like the previous periods, the decline in coal consumption would have been made up by like growth in oil, natural gas, and/or nuclear/renewables. But as the chart highlights, growth in demand fell like a stone.

The chart below shows total energy consumption (blue line) from 1980 through 2016, and the brown columns show annual change in consumption. Red arrows point out the recessions of '81, '91, '01, '09, and the present downturn. Of note should be the dashed arrow showing decelerating growth of global energy consumption since 2010. Growth slowed to such an extent by year end 2016, that it was nearly resembling previous periods of global recession.

The chart below breaks out the total energy consumption by groupings of nations, according to income per capita.

  • High income nations are those with income of $12k+ (N. America, EU, Japan/S. Korea, Aus./NZ, etc. = 1.2 billion persons, Consume 46% of global energy, Receive 64% of global income)

  • Upper middle income nations, $12 to $4k (China, Brazil, Russia, Mexico, etc. = 2.6 billion persons, Consume 42% of global energy, Receive 27% of global income)

  • Lower middle income nations, $4k to $1k (India, Pakistan, Nigeria, Vietnam, etc. = 3.1 billion persons, Consume 11% of global energy, Receive 8% of global income)

  • Low income nations, under $1k (sub-Saharan Africa, Afghanistan, N. Korea, Haiti, etc. = 700 million persons, Consume 0.6% of global energy, Receive less than 1% of global income)

Gross National Income Groupings

But first, putting the four groups relative income and per capita income in perspective (using World Bank Atlas method, detailed HERE). The chart below shows the gross national income, by the same groupings. The high income nations represent 64% of global income and the upper middle income nations another 27%, while the lower middle and low income nations represent less than 9%, combined. Not coincidentally, these breakdowns of global income, per group, line up very closely with the percentage of global energy consumed (and more broadly, global commodity consumption) by each group.

Back to global energy consumption, the chart below shows the annual change in total energy consumption, per grouping. The current period, with all sources seeing a cessation of growth, is pretty much a first. In fact, for the first time, the lower middle income nations are providing the primary annual energy consumption growth. The chart below details the annual change in total energy consumption, by the different groupings. The present deceleration of growth is rather historic.

Despite the high/upper middle income nations representing just under 50% of the world's population, they consume nearly 90% of the energy. The decelerations seen among the wealthy nations are not being recouped by growth among the poor... likely just the opposite. Decelerating activity among the wealthier nations is negatively impacting the poorer nations potential growth.

High income nations saw peak total energy consumption in 2007 and are still below that peak almost decade later. Aside from the '09 consumption collapse, the 2011 through 2016 period has seen some of the feeblest growth among these nations since 1980.