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Exploring global energy demand

An interactive graphic examines the growth of global energy and petroleum demand based on scenarios accounting for GDP and other factors, including the potential reduction in demand through increased energy productivity.

Any projection of global energy demand must deal with the various uncertainties that could have a critical impact on the path of demand growth in both the short- and the longterm. Most important among these variables are GDP growth, regulation, and technology breakthroughs.

This interactive graphic, based on research from the McKinsey Global Institute, calculates energy and oil demand in 2010, 2015, and 2020, using key variables, such as energy productivity and GDP growth. As the graphic illustrates, GDP is the most important factor affecting short-term demand for both oil and energy. In the longterm, higher fuel efficiency standards can slow the growth of oil demand. At the same time, capturing opportunities in energy productivity can dramatically reduce the growth of demand in energy. Electric vehicles—a key technological breakthrough—will not begin to seriously penetrate sales share until 2015 at the earliest, limiting their impact on the 2020 stock of more than 1 billion light vehicles globally.

Exploring growth scenarios for global energy and oil demand
Examine the growth of global energy and petroleum demand in this interactive graphic.
Recommend (209)
  • 15 JULY 2009
    John Johnston
    Program Manager
    Shell
    Houston, TX USA

    I am surprised not to see more weight given to the influence of pricing....

    .
    John Johnston
    Program Manager
    Shell
    Houston, TX USA

    I am surprised not to see more weight given to the influence of pricing. Except for a few comments on the relative price sensitivity of transport versus industrial uses, there is very little discussion of the most powerful and far-reaching driver of both supply and demand. Policies to reduce energy demand, or to shift it from one source to another, are likely to be overwhelmed unless they align with the signals that pricing gives to the several billion people that make energy use decisions every day.

    .
  • 25 JUNE 2009
    VidyaSagar Medioknda
    Analyst
    LatentView Analytics
    Chennai, India

    I think large multinational companies have to play a major role in popularizing the use of green energy (backed by the government)....

    .
    VidyaSagar Medioknda
    Analyst
    LatentView Analytics
    Chennai, India

    I think large multinational companies have to play a major role in popularizing the use of green energy (backed by the government). Every thing should start from the tiniest devices ranging from MP3 players to Laptops. We already have a lot of small companies doing this. They make use of the available renewable sources like solar, wind, and biomass. And this change has to kick start from the developing economies, as we see according to the graph above, they are the ones consuming more compared to the developed ones.

    The reason why I say developing economies is that they are the ones who look to buy more and more electronic products, and the growth rate for electronics is always on the rise. In short, these can be the factors which will affect the peoples decision on turning towards green products.

    1) Multi National companies taking initiative by manufacturing green products.
    2) Government backing up the “green start-ups” by providing subsidies.

    .
  • 14 JUNE 2009
    Graham Boyd
    VP
    Renaissance2 / TetraLD
    Belgium

    ...Such changes can only happen fast and well if done together with everyone affected by the changes. People and planet need to be in the centre together with profit as we move forward.

    .
    Graham Boyd
    VP
    Renaissance2 / TetraLD
    Belgium

    Our energy usage will keep growing as civilisation grows. The more complex and structured a civilisation is, the more energy it needs to maintain the structure.
    1) A big change to the overall energy picture will only happen when we make big changes across the entire energy supply and demand systems. The internet is one enabler in keeping a complex civilisation running on less energy.
    2) Changing the oil picture will only change if we move to renewable energy. (After all, an electric car charged from a fossil fuel power station consumes the same primary fuel per km as an equivalent petrol car, hence doesn’t change the picture overall.)
    3) Such changes can only happen fast and well if done together with everyone affected by the changes. People and planet need to be in the centre together with profit as we move forward.

    .
  • 12 JUNE 2009
    Sunny Kullar
    Colonel
    Defense
    Pune, India

    The energy demands do also have social and cultural issues attached, particularly so in developing economies...

    .
    Sunny Kullar
    Colonel
    Defense
    Pune, India

    The energy demands do also have social and cultural issues attached, particularly so in developing economies where societal elevations have made rural and underprivileged populations more dependent on energy.

    Technology and energy efficiency measures retard this move to higher consumption levels, marginally. These needs to be factored too until basic infrastructure, such as mass public transport, is established; affordable alternate technology, like electric cars, is available; and an energy-efficiency based culture is absorbed.

    .
  • 11 JUNE 2009
    Richard Devon
    Professor
    Penn State University
    State College, PA, USA

    ...So the purpose of this graphic is what? To show that energy demand is heavy and rising, is fairly recession proof, and is impervious to alternative technologies not accompanied by greater efficiency or changed behavior?

    .
    Richard Devon
    Professor
    Penn State University
    State College, PA, USA

    I am slightly bewildered by this interactive graphic. I select 50% all electric vehicles and almost nothing happens. Yet the implications are in fact huge for reducing pollution and global politics (resource wars). On the other hand it does not reduce demand much since usage is assumed to remain the same. To reduce energy use in transportation, you need mass transportation, livable cities, information technology (surrogate travel), and lighter more efficient cars.

    Similarly, usage is not necessarily affected by alternative technologies such as wind and solar but they have the same effect as electric vehicles: much less pollution and more national energy autonomy in the global economy and in homes and communities.

    To reduce demand per se is a tall order, even if a very good idea. Meeting the demand in sustainable ways is more feasible and it has been the focus to date. However a focus on end use efficiencies, see Amory Lovins work, and conservation and co-generation technologies, would do both.

    So the purpose of this graphic is what? To show that energy demand is heavy and rising, is fairly recession proof, and is impervious to alternative technologies not accompanied by greater efficiency or changed behavior?

    .
    OUR REPLY
    MKQ_response

    Jaeson Rosenfeld, author of the interactive article, responds:

    Thank you for your comments. Actually, we did include electric vehicles to call out the point that you are making. With all the talk about electric vehicles, you have to move beyond the 2020 time frame to have a major impact on demand. That’s because we’re starting from a base of zero, and electric vehicles probably will not start to even gain a share beyond a few percent in sales until about 5 years from now. Given the somewhat slow turnover rate of the vehicle stock, even achieving the very aggressive (most would say impossible) level of 50% sales share (please note the difference between sales share and stock share) of electric vehicles by 2020 will not have a huge impact on energy demand overall, and would have a 4 million barrel per day impact on oil demand (which in terms of the oil market balance would be very important). Also, of course renewables are going to have an important impact, but again by 2020, given the low base we are starting from, their impact is less than one might think.

    As we stated in our 2007 report, and we still believe, the most cost-effective and quickest way to reduce energy demand growth rates is through capturing energy productivity opportunities. This can provide a bridge to when the alternative technologies reach a more significant share, in 2020 and beyond. For this reason you will see that the energy productivity capture causes the most significant impact on demand of the different levers we explore in the graphic. Of course, the actual opportunities are extremely fragmented across countries and end-uses, so capturing them would be no small feat itself, and would require strong policy actions in the US, EU, China, India, Russia, Brazil, and the Middle East, at the very least.

    OUR REPLY
  • 10 JUNE 2009
    Chakradhar Mahapatra
    General Manager-Geology
    ONGC
    Dehradun, India

    What happens when a large chunk of the population in India, China, and other emerging economies climb on the energy and oil ladder, even without being linked to GDP growth and other supporting factors?...

    .
    Chakradhar Mahapatra
    General Manager-Geology
    ONGC
    Dehradun, India

    What happens when a large chunk of the population in India, China, and other emerging economies climb on the energy and oil ladder, even without being linked to GDP growth and other supporting factors? In school when I was scoring less than 10 (out of 100) in mathematics, I did not need any postitive stimulus to score around 20-25, only with time I ‘imporved’ to that level.

    Let’s understand one thing, the under-privileged population in emerging economies is so large that their upward migration in sectors like energy consumption, education, etc, is on auto-pilot or time-driven. GDP and other facilitating factors will only accentuate the forward process.

    I do not know, whether the model accounts for that type of underlying inertial variables, otherwise it will be akin to long-term weather forecasting.

    .
  • 8 JUNE 2009
    Abiodun Akintayo
    Nigeria

    The context of this writing seems to be inclined towards the economic impact of neglecting social issues. What is more important is the after effect of energy efficiency on the bottom line (GDP) of developing countries who export fuel....

    .
    Abiodun Akintayo
    Nigeria

    The context of this writing seems to be inclined towards the economic impact of neglecting social issues. What is more important is the after effect of energy efficiency on the bottom line (GDP) of developing countries who export fuel. These countries are still plagued with mismanagement, misappropriation of resources, and corruption and have not been able to better the lives of their citizens with the enormous funds generated from such exports. The question then is how will they survive when demand for fossil fuel decreases significantly? If such countries cannot sustain growth because of a decrease in self-generated income, then they will rely heavily on handouts and aids from developed countries thereby stretching these developed nations.

    Make hay when the sun is still shining.

    These underdeveloped exporting countries should use these export proceeds judiciously by increasing their reserves or by creating legacy structures and systems that can sustain them after 2015. If not then there is fire on the mountain and flood by the valley for these countries.

    .
  • 8 JUNE 2009
    Oliver King
    Senior Consultant
    AECOM
    London, UK

    When you consider that the science is suggesting that we need global emissions stabilisation before 2015 to remain within the mythical 2 degree C global temperature rise, this looks pretty frightening, really.

    .
    Oliver King
    Senior Consultant
    AECOM
    London, UK

    When you consider that the science is suggesting that we need global emissions stabilisation before 2015 to remain within the mythical 2 degree C global temperature rise, this looks pretty frightening, really.

    .
  • 7 JUNE 2009
    William R. Downey
    VP Energy
    Kline & Company
    Little Falls, NJ USA

    ...This underscores the complexity of any solution, the need for a local and global consideration of each solution, and the need for speed.

    .
    William R. Downey
    VP Energy
    Kline & Company
    Little Falls, NJ USA

    Richard Otte raised a very important point and it is about the time required to make a change in energy consumption, especially if the focus is light duty (passenger cars and light trucks) vehicles, as the McKinsey scenarios are focused.

    Take the US, one of the largest light-duty markets in the world, where the average age of a passenger car is nearly ten years old. Yes, you read that right, ten years... so any regulatory activity around corporate average fuel economy (CAFE) or electric vehicles will have long lead times for impact.

    And this is just light-duty vehicles in the US. Other energy uses and other geographies are not considered in my comments, and just energy/oil consumption is considered in the McKinsey scenarios, not greenhouse gases. This underscores the complexity of any solution, the need for a local and global consideration of each solution, and the need for speed.

    .
  • 5 JUNE 2009
    Hengning Wu
    President
    Acroscape
    Bristow, Virginia, USA

    The projection of global energy demand fails to consider the revolution of urban transportation from personal automated transport (PAT)...

    .
    Hengning Wu
    President
    Acroscape
    Bristow, Virginia, USA

    The projection of global energy demand fails to consider the revolution of urban transportation from personal automated transport (PAT), which will improve the energy efficiency of passenger transportation by one order of magnitude. In this case, the energy demand for developed countries will drop significantly, and the energy demand for developing countries will only increase modestly since they will largely bypass automobile and go directly to the new mode of urban transportation. The global energy demand will be lower in 2020 than the current level.

    .
  • 5 JUNE 2009
    Nisha Menon
    Senior Consultant
    DSCLES
    New Delhi, India

    How is energy productivity and its sub-criteria defined? If one had to ignore the transport sector to do such a project, what could the possible criteria be?

    .
    Nisha Menon
    Senior Consultant
    DSCLES
    New Delhi, India

    How is energy productivity and its sub-criteria defined?

    If one had to ignore the transport sector to do such a project, what could the possible criteria be?

    .
    OUR REPLY
    MKQ_response

    Jaeson Rosenfeld, author of the interactive article, responds:

    We define energy productivity opportunities as changes in processes or investments in energy efficiency that provide a 10% or greater IRR. From this standpoint, a non-credit constrained individual or company could theoretically take a loan and finance such an investment with at least indifference, and possibly a positive return depending on how great the IRR.

    We did not ignore the transport sector, there are energy productivity opportunities in this sector, particularly in passenger vehicles in some countries. However, the reason that the interactive graphic does not allow one to select light vehicle fuel efficiency and energy productivity options at the same time as these are overlapping categories, and selecting them both would cause double counting.

    OUR REPLY
  • 4 JUNE 2009
    Richard Otte
    CEP
    Promex Industries, Inc.
    Santa Clara, CA USA

    ... I’m surprised at how little the various scenarios change the energy required. That suggests we need major efforts beyond what is currently proposed to reduce green house gases.

    .
    Richard Otte
    CEP
    Promex Industries, Inc.
    Santa Clara, CA USA

    First, an observation. What is more important than the amount of energy used is the source of the energy. If we move to nuclear, and to the extent possible renewables, and greatly reduce our dependence on fossil fuels, then this level of consumption is OK. If we do not, this is worrisome due to the implied resulting global warming.

    Second, I’m surprised at how little the various scenarios change the energy required. That suggests we need major efforts beyond what is currently proposed to reduce green house gases.

    .
  • 4 JUNE 2009
    Tamer El Difrawy
    Earnings Supervisor
    Exxonmobil
    Antwerp, Belgium

    ...I have a question. I am interested to understand why under a Very Severe Downturn scenario, all other factors constant, demand in developing countries in 2010 actually rises as opposed to a Severe Downturn scenario....

    .
    Tamer El Difrawy
    Earnings Supervisor
    Exxonmobil
    Antwerp, Belgium

    Hi. I read the article and used the interactive chart which I found very useful. I have a question. I am interested to understand why under a Very Severe Downturn scenario, all other factors constant, demand in developing countries in 2010 actually rises as opposed to a Severe Downturn scenario. I would have expected it to either decrease or remain constant. is there a reason why this is the case?

    .
    OUR REPLY
    MKQ_response

    Jaeson Rosenfeld, author of the interactive article, responds:

    Tamer, A good catch on your part, there’s a 0.1 difference between the severe and very severe scenarios in oil demand to 2010. These two scenarios are virtually identical to 2010 and then really diverge in 2011, so the small differences seen are likely due to rounding. Thanks for spotting this and regards.

    OUR REPLY
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The data in this exhibit are drawn from research by the McKinsey Global Institute. A more comprehensive report, "Averting the next energy crisis: The demand challenge," is available for download.
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