A Bright Future for U.S. Oil and Gas
Friday, January 18, 2019
Are fossil fuels like oil and natural gas the energy of the past?
You could be forgiven for thinking so. There is no shortage of headlines on how renewables will be the fastest growing energy source in the coming decades, especially in rapidly growing economies, where renewables are experiencing double-digit growth. According to the BP Statistical Review of Energy, from 2016 to 2017, use of non-hydro renewables increased by 31 percent in China and nearly 20 percent in India.
But based on the global oil and gas market, we might want to pump the brakes on the hype.
Since 2014, U.S. crude oil exports have increased by more than 220 percent, and by 2020 exports are projected to hit nearly 4 million barrels per day. In 2017, China was the second largest destination for U.S. oil shipped abroad.
Last year, for the second year in a row, the United States exported more natural gas than it imported. U.S. liquefied natural gas (LNG) exports have increased by more than 4,000 percent since 2014, and by the end of 2019 our LNG export capacity will more than double. The United States will soon be the third largest LNG exporter in the world, behind only Qatar and Australia.
None of this would be possible without rapidly growing demand. The International Energy Agency (IEA) projects global oil demand will increase by 11 million barrels per day by 2040, driven mostly by a 30 percent increase in Asia. That even incorporates the growth of electric vehicles, because most of the increased oil demand will come from petrochemical manufacturing. By 2030, IEA projects natural gas will overtake coal as the second largest fuel in the global energy mix.
China’s total energy consumption from all sources in 2017 was roughly 23 billion barrels of oil equivalent. Non-hydro renewables in China accounted for the equivalent of about 782 million barrels of oil in 2017, or around 3.4 percent of China’s total energy consumption.
Meanwhile, China consumed nearly 4.5 billion barrels of oil in 2017 when it overtook the United States as the world’s largest oil importer. From 2016 to 2017, Chinese oil consumption increased by 82 million barrels. Natural gas consumption in China also increased by nearly 195 million barrels of oil equivalent over the same period.
Historically, China has not been a major natural gas consumer, at least relative to other sources: Only about 6 percent of its energy use comes from natural gas. Yet total natural gas use in China is still massive. The energy that China gets from natural gas is more than double what the United States currently gets from renewables.
All indications are that China will become an even bigger natural gas consumer. Chinese LNG imports increased by nearly 50 percent last year, and the country’s natural gas use will more than double in the next decade as part of its “blue skies” initiative to reduce pollution.
Energy from oil and gas in China is approximately eight times larger than what renewables delivered in 2017.
The world’s second most populous country, India, is also driving global oil and gas demand.
Even though renewables had double-digit growth in India from 2016 to 2017, the country’s dependence on fossil fuels was unchanged. In 2016, renewables accounted for 2.5 percent of all primary energy use in India. In 2017, they were 2.9 percent.
Oil delivers 10 times more energy for India than renewables. The country will more than double its oil use by 2035, making it the fastest growing oil consumer in the world. India gets twice as much energy from natural gas than renewables, and it is planning to build 11 LNG import terminals over just the next seven years. The country already imports about 20 million tons of LNG per year, but it hopes to more than triple that to 70 million tons by 2025.
Growing global energy demand will require a diverse set of resources and approaches, including fossil fuels, renewables, and efficiency. And to be sure, the recent growth in renewables has been impressive.
But amidst discussions about the so-called Green New Deal and as activists paint a rosy picture about transitioning to 100 percent renewables within 10 years, it is more important than ever to focus on data over political slogans.
We have the capacity to give billions of people around the world access to stable and affordable sources of energy, not only lifting them out of poverty but also ensuring that more dollars flow back into the United States.