Averting the next energy crisis: The demand challenge | McKinsey Global Institute | Natural Resources | McKinsey & Company

Averting the next energy crisis: The demand challenge | McKinsey Global Institute | Natural Resources | McKinsey & Company:

Global energy-demand growth is expected to stagnate or even contract in the short term in response to the economic downturn. But with economic recovery, demand could snap back more quickly than many observers project, driven by strong energy-demand growth from developing countries. Indeed, there is potential for liquids-demand growth to outpace that of supply—risking a new spike in oil as soon as 2010 to 2013, depending on the depth of the economic downturn.

In Averting the next energy crisis: The demand challenge, MGI and McKinsey's Global Energy and Materials Practice update an analysis of energy demand and energy productivity across regions and end users (light-duty vehicles, medium and heavy trucks, air transport, buildings, industry, and power) and takes a view on the trajectory of energy supply across fuel types. The research also examines the implications of demand growth on petroleum products' supply-demand balance. Since GDP is the most important driver of energy demand and the trajectory of world economic growth is exceedingly uncertain, the report presents several scenarios to give a feel for the range of outcomes possible.

In a moderate GDP scenario, the report projects that energy-demand growth will recover to 2.3 percent a year between 2010 and 2020, nearly a full point faster than the period from 2006 to 2010. Developing regions will account for more than 90 percent, with demand growth most rapid in the Middle East. During the same period, a moderate case projects energy-demand growth in both China and India growing by 3.6 percent. In stark contrast, US demand for fossil fuels—natural gas, oil, and coal—will remain exactly flat to 2020. Meanwhile, energy demand growth in Japan will be virtually flat, while Europe will see energy demand growing at a rate of some 1 percent, reflecting the continuing demand growth from emerging Eastern and Southern European countries. Under current policies, the report finds that CO₂ emissions will grow slightly more slowly than energy demand as carbon-intensive coal use increases more quickly than that of other fuels but rapid growth in renewables helps to offset this.

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