Growth in Asia to keep demand for fossil fuels high

U.S., Australia to benefit as suppliers

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Despite the recent buzz over renewable fuel sources such as wind and solar power, fossil fuels will still be the globe’s dominant energy source for decades to come, according to a major market survey released Tuesday.

And the move in many industrial powers to cleaner sources of fuel is being offset by the continued reliance on fossil fuels in much of the rest of the world.

In North America, Australia and much of Europe, according to the 2013 World Energy Report put out by the Paris-based International Energy Agency (IAE), the market share of fossil fuels such as natural gas, oil and coal will fall from 68 percent in 2011 to 57 percent in 2035.

However, because of the increase in demand in developing countries led by China and India, the current demand for fossil fuels, at 82 percent of all fuel sources, is the same as it was 25 years ago. With high demand from the developing world for conventional fossil fuels, renewable energy sources are only expected to reduce the demand for gas, coal and oil to about a 75 percent market share in 2035.

“Coal remains the largest source of generation, with strong growth in non-[Organization for Economic Cooperation and Development] countries far outweighing reductions in OECD countries,” the report says.

There are signs of improvement in renewable energy however, as the share of renewables in total power generation is projected to rise from 20 percent in 2011 to 31 percent in 2035.

Asia’s surging energy demand will have a massive transformative impact on world energy markets, particularly in Australia and the United States.

Asia will “need every bit of Australia’s energy exports coal, gas and maybe even uranium,” Fatih Birol, chief economist for the IEA, said at the news briefing accompanying the report’s launch. “I see a golden age for the Australian economy to come, looking at the export volumes and the prices we expect.”

The United States, meanwhile, is expected to become the top supplier of natural gas and electricity to Southeast Asia, outpacing rivals in Europe and Japan. Natural gas in the U.S. trades at one-third of import prices to Europe and one-fifth to those in Japan, giving U.S. producers a significant advantage.

“The United States, which experiences relatively low energy prices, sees a slight increase in its share of global exports of energy-intensive goods, providing the clearest indication of the link between relatively low energy prices and the industrial outlook,” said IEA Executive Director Maria van der Hoeven.

The availability and affordability of energy will play a critical role in income growth and industrial competitiveness for the major economies in the decades to come, and the fracking natural gas boom in the United States has already rewritten global energy flows.

“Lower energy prices in the United States mean that it is well-placed to reap an economic advantage, while higher costs for energy-intensive industries in Europe and Japan are set to be a heavy burden,” Mr. Birol said.

The energy economy in Brazil is also expected to boom in the coming years, provided Brasilia continues to invest heavily in the sector.

“Brazil’s energy sector undergoes a huge expansion between now and 2035,” according to the report. “Its resources are abundant and diverse and their development over the coming decades moves the country into the top ranks of global energy producers.”

Even with all the changes in global energy flows, the Middle East will continue to be the world’s only large source of low-cost oil, and is expected to be the key source of oil supply growth in the mid-2020s, the IAE analysts said.

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