Top 5 Global Energy Supply & Demand Lessons of 2022
> Global oil and gas demand is still growing
> Secure supply chains are now of paramount importance
> The world needs both fossil fuels and renewables to fulfill our energy needs
> Unrealistic energy policies harm global progress towards a better future
> LNG is a climate solution to rising coal emissions worldwide
A new year calls for new reflection on the most important lessons from 2022. As tumultuous as it was, this past year had much to teach us – like the importance of responsible and reliable supply chains for sourcing food, energy and other critical commodities.
That said, here are a handful of the top energy-related supply and demand lessons we shouldn't forget anytime soon. Taking these memories with us into 2023 and beyond will make the world a better place.
#1 - Global oil demand is still growing and showing resilience
Anti-Canadian energy activists and environmental non-governmental organizations (NGOs) expected the past few years to be a significant turning point in global oil demand growth patterns.
But once again, they were wrong.
Despite the decline in demand below record levels throughout 2020-2022, the world continues to consume more and more oil.
The International Energy Agency's (IEA) most recent outlook predicts demand for the commodity to continue growing for decades.
Historically, drops in global oil demand were always followed by a relatively strong return to and growth past previous consumption levels. With global oil demand expected to increase to a record-high of 104 million barrels per day in 2023, history is repeating itself once again – as it did after the drop in 2008 and other years before that.
There are several reasons why global oil demand has again shown resilience in the face of "adversity" from anti-oil and gas opponents:
1. Rapid economic growth in emerging market economies, especially in Asia
2. With current technologies, it is inherently difficult (or should we say impossible) to displace oil in the transportation, industrial and other sectors of the global economy
3. Oil and natural gas are plentiful and the technologies used to extract them continue to improve, reducing costs and improving efficiency
There are more.
We've said it before and will say it again: as long as the world needs oil and gas, it should come from the most stable and reliable producers around – nations like Canada with exemplary records on advancing environmental protection, social progress and human rights. Don't you agree?
#2 - Stable and reliable supply chains are of paramount importance
Global energy shortages exacerbated by the war in Ukraine show why having responsible suppliers for everything from food to minerals to energy is paramount for countries in 2023 and beyond.
That's because energy and other resource shortages have severe and unintended real-world consequences.
Europe, for example, has seen skyrocketing electricity and natural gas prices as it weans off Russian energy, severely affecting households and businesses across the continent.
Many Europeans have been forced to choose between showering or cooking, while others have returned to burning wood to keep themselves warm this fall and winter. Some European industries have been forced to either shut down permanently or return to burning coal or oil.
Switching back to more greenhouse gas (GHG) intensive forms of energy isn't good for climate action (sorry for stating the obvious).
The International Energy Agency explains best in its Global Energy Crisis October 2022 report:
Higher energy prices have contributed to painfully high inflation, pushed families into poverty, forced some factories to curtail output or even shut down, and slowed economic growth to the point that some countries are heading towards severe recession .
Putting energy production into the hands of reliable democratic suppliers like Canada can help prevent future energy crises while diminishing the relevance of autocrats that may choose to "turn off the taps" at a whim over international geopolitical disputes.
#3 - The world needs both fossil fuels and renewables
Global energy shortages seen in Europe, Asia, North America and elsewhere around the globe in 2022 indicate a fundamental reality: We are not yet ready to speedily transition away from fossil fuels towards renewables.
Rather, this transformation of our global liquid-based energy systems to material-based systems will take decades longer than we anticipate, and must be carefully calculated so that we don't backtrack on our climate action progress in the process.
Realities about the energy transition we must face and can find solutions for if we take a balanced, pragmatic and non-polarizing approach:
> The climate is global, therefore major emitters like China and India must be on board if we want to accomplish our net zero goals by 2050. Despite the IEA's efforts to guide the world towards less coal use, the hard reality is that it continues to be an indispensable fuel for power generation and industrial production in developing market economies abroad.
> Coal use was at an all-time high in 2022, according to the IEA. While China and India continue to build new coal power generation in droves, several European countries have announced the extension or reopening of coal plants to compensate for energy shortages due to the war in Ukraine. The IEA expects global coal use to remain consistently high through 2025 and potentially beyond.
> Without sufficient gas supplies, many countries have been forced to return to more GHG-intensive forms of power generation such as coal and oil to supplement their energy needs, a reversal of some progress made on global emission reductions through the build-out of renewables.
> The increase in demand for critical minerals and metals such as nickel, copper, lithium, graphite and rare earths poses a significant problem to the world's net zero ambitions. These materials must be developed and produced at extraordinary rates to manufacture the cleantech required for any future energy transformation. Such mines can take anywhere from 10 to 15 years before first production. In Canada - due to an overburdening regulatory process - that could be up to 25 years, or by 2048 if you will.
For example, the IEA says we need…
• 41x lithium
• 25x graphite
• 21x cobalt
• 19x nickel
• 8x manganese
• 3x rare earths
…current production levels to reach its Sustainable Development Scenario (SDS) by 2040, a trajectory that would put the world on course to meeting its Paris Agreement goals .
> The IEA has said that half of the technologies required to reach net zero by 2050 are not yet commercially available. In other words, they do not yet exist.
> Transitioning away from fossil fuels without having ample replacement from stable and reliable energy sources threatens global stability. As we've seen with events in 2022, putting our energy supply into the hands of autocratic regimes does nothing to advance international peace and prosperity, social progress, human rights or environmental protection.
> A recent analysis by McKinsey estimates that global spending on physical assets in the transition to net zero would cost about $275 trillion between 2021 and 2050, or about $9.2 trillion annually. For context, that equates to about 7.5% of the global economy annually, and is 4.5x larger than Canada's GDP. So where exactly is all that money going to come from? According to an executive at Goldman Sachs, the world spent $3.8 trillion on renewables between 2012-2021 and only managed to move global energy demand accounted for by fossil fuels from 82% down to 81%.
Now, all this isn't to say that we shouldn't attempt to move towards using cleaner energies wherever we can. We should, and are already in many instances.
However, the reality is that we need an all-of-the-above solution to global energy shortages, including renewables, nuclear, geothermal, hydrogen, oil and gas, etc. We can not afford to favour one form over another, as made evident by the fragility of global energy systems over the past few years.
We must take on an "addition" policy with renewables rather than "replacement," where wind, solar and other cleantech are added to our grid's base supply instead of replacing reliable forms of power such as nuclear and natural gas.
#4 - The world is not better off with unpragmatic energy policies
Giving in to the demands of small but loud groups of anti-oil and gas activists who insist we shut down energy production in countries like Canada does nothing to make the world a better place.
These activists oppose pragmatic solutions to global warming, like coal-to-gas switching and nuclear power. They also oppose emission reduction methods such as carbon capture, storage and utilization (CCUS), which has an integral role to play in global net zero emissions according to the IEA.
Why is that? You'd think the end goal of climate activists is emission reductions by any means necessary, but that doesn't seem to be true.
But perhaps most astoundingly, they seem to have no concept of even the most elementary principles of supply and demand in a global economy. If buyers can't source Canadian energy, they will look elsewhere abroad to fulfill their supply needs.
For example, shutting down responsible energy production in places like Canada does nothing to keep a single molecule of oil or natural gas in the ground. Such activism makes it easier for countries like Venezuela and Saudi Arabia to grasp international energy market share while reaping the benefits.
These autocratic regimes don't share our values, nor care as much - if at all - about the things that we do such as the freedom to vote, freedom of religion, and other integral underlying principles of a free and fair democracy.
Furthermore, global energy production from democratic countries is dwindling as the years pass by. According to the Economist, state-owned companies:
- hold two-thirds of the world's oil reserves
- produce three-fifths of the world's crude oil
- produce half of the world's natural gas supplies
This should be of concern for us all.
It is in our best interests to put as much energy production as possible in the hands of stable, responsible, reliable and democratic energy producers like Canada. Lessons from the oil embargoes of the 1970s and the 2022 war in Ukraine make that abundantly clear.
#5 – LNG is a solution to record-high coal demand
Environmentalists repeatedly – and wrongfully – claimed in various debates with us throughout 2022 that global coal demand is declining and that oil and natural gas would soon follow suit. However, skyrocketing energy prices and widespread shortages have seen coal return to the global stage for power generation stronger than ever before.
According to the IEA's Coal 2022 Report, demand was projected to grow 1.2% in 2022, hitting a record high and is to stay relatively stable through 2025 .
Natural gas shortages due to Russia's invasion of Ukraine were a primary reason coal demand soared in Europe last year. However, even if the world's most climate-focussed continent can reign in its coal power generation by 2025, demand for the energy source in Asia is set to grow for years to come.
The IEA is clear on the emission reduction benefits of replacing coal-fired power generation with natural gas. In a 2019 report, the Paris-based organization stated that since 2010 coal-to-gas switching had prevented more than 500 million tonnes of carbon dioxide (CO2) from entering the atmosphere .
It makes sense. Natural gas is the cleanest burning fossil fuel. When used for power and heat generation, it burns roughly 50% cleaner than coal and 30% cleaner than oil. Fatih Birol, the IEA's Executive Director, often states how vital gas is as a transition fuel.
"Natural gas is one of the mainstays of global energy. Where it replaces more polluting fuels, it improves air quality and limits emissions of carbon dioxide. In this analysis, we explore how widespread and durable this role might be in some of today's key energy markets," Fatih elaborates in the aforementioned report.
Asia's rapidly growing thirst for more electricity by any means necessary means we must start to provide the continent with cleaner alternatives other than coal, and in the process can take action on climate via coal-to-gas switching.
Hence, liquefied natural gas (LNG) is a natural solution to rising coal emissions. And Canadian LNG projects are expected to be some of the cleanest in the world.
Anti-Canadian oil and gas activists don't like to hear it when the IEA reiterates the critical role of natural gas in future energy transformations.
Well, that's the truth. Coal-to-gas switching is paramount to reducing global emissions in the near to long term.
With global LNG demand poised to skyrocket by roughly 90% over the next 15-20 years, it only makes sense that Canadians reach for global market share and reap the benefits.
More Canadian energy on global markets means less dictator energy and fewer dollars for corrupt and brutal regimes that just aren't as responsible as we are. They're not even close.
Join Us Today!
The world needs more Canadian resources! Join us today on Facebook, LinkedIn and YouTube to learn more about how natural resources benefit our families, global energy security AND the environment!
The world needs more #CanadianEnergy — We are a leader in protecting people and the planet. pic.twitter.com/T4XMMgdEb3— Canada Action (@CanadaAction) January 8, 2023
1 - International Energy Agency – Global Energy Crisis, Date Accessed: January 2023 (https://www.iea.org/topics/global-energy-crisis)
2 - International Energy Agency - The Role of Critical Minerals in Clean Energy Transitions, Date Accessed: January 2023 (https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions/mineral-requirements-for-clean-energy-transitions)
3 - oilprice.com – Coal demand to remain robust in 2023, Date Accessed: January 2023 (https://oilprice.com/Energy/Energy-General/Coal-Demand-To-Remain-Robust-In-2023.html)
4 - International Energy Agency - The Role of Gas in Today's Energy Transitions, Date Accessed: January 2023 (https://www.iea.org/reports/the-role-of-gas-in-todays-energy-transitions)
Share this page to spread the word.
Canada Action's Best Blogs (2022)
Canada Action has had one of the most successful years yet, reaching more people across the country than ever before with balanced, fact-based, non-partisan and honest discussions on our world-class natural resources sector. To celebrate this success, we’d like to share some ...
Canada Action's Top LNG Tweets (2022)
Yet again, Canada Action has had another very successful year 2022, reaching more and more Canadians across the country with our balanced, fact-based and non-partisan discussions on our world-class natural resources. A large part of our content in 2022 centred around liquefie...
Canada Action Top Facebook Posts (2022)
Canada Action had yet another incredibly successful year in 2022, reaching increasingly more Canadians across the country year-over-year with our balanced, fact-based and non-partisan discussions on our world-class natural resources. To celebrate that success, we’ve compiled ...