In June of each year two important reports greatly aid our understanding of the global energy industry. These are keys source of energy statistics for me, and I always look forward to their release.

The Renewables 2016 Global Status Report (GSR) was released two weeks ago by the Renewable Energy Policy Network for the 21st Century (REN21). The GSR provides a comprehensive view of the global renewable energy picture.

But the bible of energy data is the BP Statistical Review of World Energy. Last week the 2016 report covering statistics through 2015 was released. The BP statistical review provides global and country-level statistics on production and consumption for oil, natural gas, coal, nuclear power and renewables, as well as carbon dioxide emissions.

I will delve deeper into both of these reports in upcoming articles, but today I want to do a high-level review of the newest BP Statistical Review and then look in some detail at the oil markets.

The Big Picture

The headlines from the report should not surprise regular readers, as they cover themes that we have repeatedly covered in depth. Demand for crude oil has never been higher, growing a robust 1.9 million barrels per day (bpd) from 2014 (+1.9% year-over-year). Likewise, natural gas consumption grew by 1.7% from 2014 to an all-time high. Coal, on the other hand, suffered its largest annual decline in consumption in at least 50 years — down 1.8% from 2014. Nuclear power grew a modest 1.3%.

Renewables also had a record year, with strong growth in solar power consumption (+33% year-over-year) leading the way. Wind power consumption grew 17%, while growth in geothermal (+5%), hydropower (+1%) and biofuels (+0.9%) was modest.

Despite the record year for renewables, it was also a record year for overall fossil fuel consumption. As a result, global carbon dioxide emissions once again set a new all-time record high. Carbon dioxide emissions in 2015 were 36 million metric tons higher than in 2014, setting a record for the sixth straight year.

In upcoming issues, I will take a closer look at each of these sectors. Today it’s crude’s turn.

Oil Market Review

The key takeaway from this year’s report is that — as we continue to stress — rumors of oil’s demise have been greatly exaggerated. Crude oil demand growth was strong in 2015, and continues the long-term growth trend that started in the early 1980s.

It may not be obvious, but last year’s demand growth was actually the strongest since 2010. I know that there are plenty of news stories warning about waning demand for crude oil, but as I have argued repeatedly I believe this is based on wishful thinking about the rate of adoption of electric vehicles.

We did catch early warning signs of the downturn in the coal industry, and have largely avoided that sector as a result. If there are legitimate worries on the horizon for crude oil demand we will warn you about them.

One reason many people believe crude oil demand is declining is that it has in fact declined in developed countries. Demand in member countries of the Organisation for Economic Co-operation and Development (OECD) — the grouping of the world’s developed countries — is down by 4.4 million bpd from its peak in 2005 (although OECD demand did grow in 2015).

But demand growth in developing countries continues to drive the global total higher. Non-OECD growth since 2005 was 14.7 million bpd, more than offsetting the declines in the OECD. In just the past six years, demand in developing countries has increased by just under 10 million bpd, and is now well above OECD demand. Non-OECD growth is dominated by the Asia Pacific region, which added another 1.3 million bpd of demand in 2015.

Despite strong growth, demand hasn’t kept pace with the production surge of the past five years. In 2015, global crude oil production increased by 2.8 million bpd. Note that BP defines oil as “crude oil, shale oil, oil sands and NGLs (natural gas liquids — the liquid content of natural gas where this is recovered separately).” Per this definition, the U.S. was the world’s largest producer of crude oil at 12.7 million bpd — up 1 million bpd over 2014. This marks seven straight years of increases in U.S. crude oil production, but you can expect that streak to be broken this year.

Of course the U.S. remains the world’s top oil consumer as well. Thus, the repeal of the crude oil export ban in the U.S. has had little impact on domestic oil producers, as we remain a net importer of crude. Among the Top 10 crude oil producers in the world in 2015, only the U.S. and China consume more than they produce:

Top 10 Global Oil Producers in 2015, million barrels per day

Not only did the U.S. produce more oil than any other country, but U.S. production exceeded that of Africa (8.4 million bpd), Asia Pacific (8.3 million bpd), and the combined total of South and Central America (7.7 million bpd). OPEC members accounted for 41% of the world’s crude oil production in 2015.

Global proved crude oil reserves declined only slightly from 2014, but this is almost certainly unrealistic in my view. Many countries have added major oil reserves over the past decade in response to high oil prices, but much of these reserves would not be economical to produce at today’s prices. Venezuela, for instance, added more than 200 billion barrels of proved reserves to its books since 2007, but this is mostly very heavy oil that is expensive to produce.  

Hence, by the strict definition of proved reserves it is my opinion that the 1.7 trillion barrels of proved reserves reported at the end of 2015 are overstated by several hundred million barrels. An assessment published earlier this year (here) estimated that the overstatement could be as high as 875 million barrels — just over half of the claimed proved reserves number.

Conclusions

According to the latest release of the BP Statistical Review of World Energy, 2015 was another record year for energy production and consumption. Overall, fossil fuels and nuclear power saw increased consumption in 2015, but coal consumption was notably down. Growth continues to be dominated by developing countries, while US oil production increased for the seventh straight year.

In upcoming issues, I will dive into the remainder of the report, supplementing the discussion with more details from the Renewables 2016 Global Status Report.

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