Possibility of Natural Gas Over Taking Demand for Oil

At a conference in Vienna, the Vice President for Strategic Planning for BP, Dominic Emery, stated that he expects natural gas to overtake oil as the world’s primary energy source in 2040, as well as surpass the percentage of coal contribution as early as 2030.  There are plans to reveal more about their energy outlook on February 20th.  The International Energy Agency’s World Energy Outlook projects that global gas demand to grow by 50%, passing at least coal by 2040.

Emery believes the biggest challenge facing the natural industry is working to reduce methane leaks, which currently average 1.3%-1.4%.  If it exceeds 3%, then natural gas would actually be more harmful than oil from a greenhouse gas perspective.  There are major climate and economic benefits to reducing such methane leaks.

Natural Gas Energy / https://instituteforenergyresearch.org/topics/encyclopedia/natural-gas/

Overall, last year demand for natural gas grew by 1.6% percent compared to demand for oil’s growth was half that at .8%.  Overall, that 1.6% is substantially lower than natural gas’ ten year average of demand growth, which is 2.3%.  Natural gas consumption in the U.S. has been quickly and steadily increasing since 2007, but tapered off this year.  Total U.S. natural gas consumption decreased by 1% from 2016 to 2017.  However, it should be noted that this decrease mainly reflects warm winter temperatures across the country and thus lower electric power sector use.  Also, reduced demand in Brazil and Russia could have contributed to less growth this past year.  However, specifically industry and transport in past years have seen promising growth rates of 3-4% a year, albeit from a low base of demand.  The U.S.  Energy Information Administration found that the industrial sector specifically increased by 1.6% in 2017, with projected growth of 1.2% in 2018 and 2.6% in 2019.  Gas consumption in the European Union rose sharply by 7.1%.  Additionally, demand growth in China was 15% for natural gas year to year last year.  Many countries across the globe has be focused on improving the infrastructure to use natural gas as an energy source in more sectors.

A big appeal of natural gas is its flexibility.  Natural gas is overall more flexible than renewable energy options and other fossil fuels.  Natural gas is used for electricity, industry, residential and commercial heating, and transport.  Whereas coal is currently used almost exclusively for electricity.  Also, it is estimated that turmoil in the Middle East and Africa withdrew about 3 million barrels per day from world markets between 2005-2015.  Alternatively, the United States is able to produce a lot of natural gas and in 2015, exported more natural gas than was imported.

Natural gas could potentially have a positive effect on climate change, as it produces less greenhouse gases than oil or coal.  Regulations to suppress coal use have benefitted natural gas a replacement.  There is, however, a concern that it could crowd out renewable energy sources.  Natural gas use does involve methane leaks and carbon dioxide exhaust, so there would still be greenhouse gas emissions, but much less than coal or oil.

Obviously, though, there would still be more greenhouse gas emissions than a renewable source like wind, solar, or hydroelectric.  Some believe that companies and people should focus more on renewable energy, especially since the costs of wind and solar are dropping rapidly.  But, natural gas does have the advantage of being more consistent than wind or solar.  Wind and solar sources are at the mercy of seasonal, daily, and random variations in sunlight and breezes.  Renewable-only proponents propose that hydroelectric power could serve as a backup to wind and solar power.   Hydroelectric power currently accounts for 75% of global renewable energy and is not projected to grow.  Some believe that natural gas has a better potential for growth.  

Hydroelectric Power / http://www.researchsafari.com.au/uploads/4/5/3/8/45385327/401229663_orig.jpg

Overall, natural gas has a lot of potential to take up a large share of the market.  Most agree that natural gas is going to surpass coal soon and likely oil in the not far off future.  Just how much of the market they gain may depend on competition from renewable energy.

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