Emerging economies set a long run floor under fossil fuel demand
Why Europe's import bill is written elsewhere
A new long range outlook from S&P Global puts a number on a shift that already shapes this year's prices. Energy demand in emerging and developing economies could rise by more than 60% by 2060, which S&P likens to adding another China to the global energy system. Total world primary demand grows more slowly in its central pathway, by roughly a quarter, because advanced economies and China flatten out.
Growth in primary energy demand, today to 2060
Emerging and developing economies
World total
Show the figures
| Demand growth to 2060 | |
|---|---|
| Emerging and developing economies | more than 60% |
| World total | about 25% |
How that growth is met matters more than its size. Solar is spreading fastest in the developing world: Ember calculates that countries accounting for 63% of emerging market power demand already generate a larger share of their electricity from solar than the United States, helped by low cost Chinese equipment. Yet S&P vice chairman Dan Yergin told Marketplace that growth will be met by "a multiplicity of different energies", including possibly more coal, with oil and gas in the mix for longer than many expect.
Katie Auth of the Energy for Growth Hub framed the development argument plainly in the same interview: this demand reflects rising incomes and jobs, and "the average Liberian consumes less electricity in a year than my refrigerator does." Poorer economies will not wait for renewables to become cheaper still before expanding their energy systems.
The causal chain for European buyers is direct. The Netherlands imports most of its oil and a rising share of its gas, and those prices are set by the marginal cargo on a global market. When demand in Asia, Africa and Latin America keeps growing, Europe keeps bidding against fast growing importers for the same crude and LNG, even as its own consumption falls. This week's Hormuz headlines are the acute version of that competition. For businesses in industry, horticulture and healthcare that budget over three to five years, the practical conclusion is to treat falling European demand as no guarantee of falling European prices.