Recession Drove 2009 Energy Consumption Lower

BP Chief Economist Christof Ruehl said, “Energy consumption reflected the pattern of recession and recovery. For the world as a whole, primary energy consumption fell by 1.1 per cent in 2009, the first decline since 1982. Consumption in the industrialized countries of the OECD fell by 5 per cent - more than their decline in GDP; those countries consumed less energy last year than ten years ago. Energy consumption outside the OECD increased by 2.7 per cent - more than their increase in GDP and driven by growth in China. The shift toward the developing world continues.”
Commenting on the data highlights in the review, Iain Conn, Group Managing Director and Chief Executive of Refining & Marketing said: “Last year’s decline in global energy consumption was rare; and where we have data so far in 2010 energy consumption is again on the rise. The world needs to invest today to be able to deliver the energy supplies that will be needed in the future. Events in the Gulf of Mexico, however, demonstrate that access to some energy resources will almost certainly require enhanced measures to ensure safe operations and capabilities to safeguard the environment."
Globally, consumption of oil, natural gas and nuclear power declined, while coal consumption was essentially flat; only hydroelectric output and other renewable forms of energy increased in 2009. The data on energy consumption suggests that global carbon dioxide (CO2) emissions from energy use fell for the first time since 1998.
For the year as a whole, prices for all forms of traded energy fell, with the sharpest declines seen for traded natural gas and coal in North America and Western Europe - though Asian coal prices fell less sharply in face of strong Chinese import growth. Oil prices declined for the first time since 2001. During 2009, prices for oil and coal in competitive markets hit their low points early in the year, with oil prices recovering first, while spot natural gas prices in North America and Western Europe continued to decline well into 2009.
In addition to varying demand stories by fuel and region, the different price paths were also driven by supply-side stories. In the oil market, sustained OPEC cuts led production to fall even more rapidly than consumption did. For natural gas, sharp production declines in Russia, Turkmenistan, and Canada were partly offset by growth in LNG and the US. In turn, robust US gas production growth (the strongest in the world for three consecutive years) was driven by unconventional supply, especially shale gas.
The Review reports proved oil reserves of 1,333.1 billion barrels at the end of 2009, including Canadian oil sands under active development and an upward revision in official Venezuelan reserves. Global reserves are sufficient to meet 2009 production for 45.7 years. On the same basis, reserves of gas are sufficient for 62.8 years and coal for 119 years.

Oil
Dated Brent averaged $61.67 per barrel in 2009, a decline of 37 per cent – the largest decline (in percentage terms) since 1986. Prices began the year below $40 and rose steadily throughout the year, reaching a peak of more than $78 in mid-November. Sustained OPEC production cuts and improving economic prospects as the year progressed supported prices.
Global oil consumption declined by 1.2 million barrels per day (bpd), or 1.7 per cent, the largest decline since 1982. OECD consumption fell by 4.8 per cent (2 million bpd), a fourth consecutive decline. Outside the OECD, consumption growth slowed to 860,000bpd, or 2.1 per cent, the weakest percentage growth since 2001. China, India, and Middle Eastern countries accounted for all of the non-OECD growth.
Global oil production dropped even more rapidly than consumption, falling by 2 million bpd, or 2.6 per cent, the largest drop, again, since 1982. OPEC production cuts implemented late in 2008 were maintained throughout 2009, resulting in a decline of 2.5 million bpd, or 7.3 per cent. Every OPEC member participating in the production-cutting agreement reduced output in 2009. OPEC’s Middle Eastern members accounted for nearly 75 per cent of the overall reductions.
Oil production outside OPEC grew by 0.9 per cent or 450,000bpd. US production increased by 460,000bpd, or 7 per cent, the largest increase in the world last year and largest US percentage increase in our data set. Elsewhere, production growth in Russia, Brazil, Kazakhstan, and Azerbaijan was offset by continued production declines in China and mature OECD provinces of Mexico, Norway, and the UK. Russia surpassed Saudi Arabia as the world’s leading oil producer in 2009.
Global refining capacity in 2009 grew by 2.2 per cent, or 2 million bpd, the largest increase since 1999. Non-OECD capacity surpassed OECD capacity for the first time. Higher refining capacity and declining consumption pushed global refinery utilization to 81.1 per cent, the lowest rate since 1994.

Natural gas
Globally, natural gas was the fuel that experienced the most rapid decline in consumption, falling by 2.1 per cent, the largest decline on record. Consumption declined in all regions except the Middle East and Asia-Pacific. Russia had the world’s largest decline (in volumetric terms), with consumption falling by 6.1 per cent. OECD consumption fell by 3.1 per cent, the largest decline since 1982.
Global gas production declined for the first time on record. Production fell sharply in Russia (-12.1 per cent) and Turkmenistan (-44.8 per cent), driven by declining consumption – in Russia and much of the rest of Europe – and the availability in Europe of competitively-priced LNG. Continued expansion of unconventional supplies allowed the US to record the world’s largest increase in production for the third consecutive year, surpassing Russia as the world’s largest producer.

Other fuels
Global coal consumption was flat in 2009, the weakest annual change since 1999. The OECD (-10.4 per cent) and the FSU (-13.3 per cent) experienced the steepest consumption declines on record, due to the combination of recession and competitively-priced natural gas. Elsewhere, consumption grew by 7.4 per cent, near the historical average, with China accounting for 95 per cent of the increase.
Global nuclear output dropped by 1.3 per cent, a third consecutive global decline. Hydroelectric generation grew by a below-average 1.5 per cent, which was nonetheless sufficient to make hydro the world’s fastest-growing major fuel in 2009.
While other forms of renewable energy remain a small share of the global energy mix, they have continued to grow rapidly. Continued government support, including targeted fiscal stimulus in many countries, helped to boost global wind and solar generation capacity by 31 per cent and 47 per cent, respectively. Ethanol production rose by 8 per cent, just over half the historical average.