International Energy Outlook 2018 (IEO2018)

for
Center for Strategic and International Studies
July 24, 2018 | Washington, DC

by
Dr. Linda Capuano, Administrator
U.S. Energy Information Administration

U.S. Energy Information Administration Independent Statistics & Analysis www.eia.gov

Key takeaways
• Energy consumption in the non-OECD countries began to exceed OECD consumption in 2007 and
is projected to reach nearly two-thirds of the 739 quadrillion Btu global energy consumption in 2040

• The world’s energy consumption through 2040 increases, on average, for all fuels in the IEO2018
Reference case

• The IEO2018 side cases show higher economic growth drives increasing energy consumption,
while services or manufacturing pathways to growth modulate that consumption

• Per capita energy consumption in India and Africa remain comparatively low despite high
economic growth in the IEO2018 side cases

• IEO2018 side cases highlight the need to further explore the relationship between high economic
growth, relative sizes of the services and manufacturing sectors, and energy consumption

Dr. Linda Capuano, CSIS

IEO2018, July 2018 2
Non-OECD nations are projected to account for 64% of the 739 quadrillion Btu global
energy consumption by 2040
IEO2018 Reference case
world energy consumption
quadrillion Btu
History Projection
500 473

400
Non-OECD

300
266

200 OECD

100

0
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040

Source: EIA, International Energy Outlook 2018

Dr. Linda Capuano, CSIS

IEO2018, July 2018 3
Asia is projected to have the largest increase in energy use of non-OECD regions
IEO2018 Reference case
non-OECD energy consumption by region
quadrillion Btu

History Projection
500 739

661
400 610
575
523 303 Asia
300
257
200 224
200 410 157
356
Middle East
50 78
100 Africa
Americas
Europe and
Eurasia
0
1990 2000 2010 2015 2020 2030 2040
Source: EIA, International Energy Outlook 2018

Dr. Linda Capuano, CSIS

IEO2018, July 2018 4
Many non-OECD countries are projected to lead global economic growth
IEO2018 Reference case
average annual percent change in real GDP by region, 2015–40
OECD Non-OECD

Australia/New Zealand 2.4% India 6.0%

China 4.5%
Mexico/Chile 2.3%
Other Asia 4.2%
United States 2.1% Africa 3.8%
South Korea 2.0% Middle East 3.1%

Canada 1.6% Other Europe/Eurasia 2.5%

Other Americas 2.4%
OECD Europe 1.5%
Brazil 1.6%
Japan 0.4%
Russia 1.4%
Total OECD 1.7% Total Non-OECD 4.1%

0% 2% 4% 6% 0% 2% 4% 6%

Source: EIA, International Energy Outlook 2018

Dr. Linda Capuano, CSIS

IEO2018, July 2018 5
World energy consumption increases for fuels other than coal
IEO2018 Reference case
world energy consumption by energy source
quadrillion Btu

History Projection
250
petroleum and other liquids 229
200
coal 182
161
150
natural gas 129
100
renewables
50
38
nuclear
0
1990 2000 2010 2020 2030 2040

Source: EIA, International Energy Outlook 2018

Dr. Linda Capuano, CSIS

IEO2018, July 2018 6
The industrial sector accounts for the largest share of world energy consumption
IEO2018 Reference case
world delivered energy consumption in the industrial and all other end-use sectors
quadrillion Btu

History Projection
350

300
all other end-
250 industrial use sectors 276
259
245 255
237
200 227
211 206
181 196
150

100

50

0
2010 2015 2020 2030 2040

Source: EIA, International Energy Outlook 2018

Dr. Linda Capuano, CSIS

IEO2018, July 2018 7
Sector shares in China, India, and Africa start at different points in 2015
sector share of total gross output in 2015
percent

100% 3% 1%
5% 9% mining
12%
15% agriculture
75% 33%
42%

50% 47% services

51%
25% 33%
16% manufacturing

9% 12% 13% construction

0%
China India Africa

Source: EIA, International Energy Outlook 2018

Dr. Linda Capuano, CSIS

IEO2018, July 2018 8
IEO2018 examines comparative economic growth cases in China, India, and Africa
• China: Two cases that assume GDP will grow 5.7%/year from 2015 to 2040, compared with 4.5%/year in
the IEO2018 Reference case
– A more rapid transition to a consumption-led economy and increased demand for services; the personal consumption share of
GDP rises to 60% by 2040, compared with 50% in the IEO2018 Reference case
– China continues its large industrial investment- and export-led growth; the investment share of GDP is 51% in 2040, compared
with 32% in the IEO2018 Reference case

• India: Three cases that assume GDP will grow about 7.1%/year from 2015 to 2040, compared with
6.0%/year in the IEO2018 Reference case
– An investment-led economy with more industrial sector investment; the investment share of GDP rises from 29% in the IEO2018
Reference case in 2040 to 38%, loosely patterned after China’s recent growth
– An export-led economy with more output from trade-sensitive, energy-intensive industries such as chemicals and refining; the
export share of GDP increases from 23% in the IEO2018 Reference case in 2040 to 55%, loosely patterned after South Korea
– A personal consumption-led economy with more output from services; the personal consumption share of GDP rises from 61% in
the IEO2018 Reference case in 2040 to 67%, loosely based upon current U.S. levels of personal consumption

• Africa: One case that assumes GDP will grow 5.0%/year from 2015 to 2040, compared with 3.8%/year in
the IEO2018 Reference case

Dr. Linda Capuano, CSIS

IEO2018, July 2018 9
China’s GDP and energy consumption growth have slowed in recent years
Chinese GDP and energy consumption
annual growth rate, five-year moving average
15%

China GDP
10%

China total primary

5% energy consumption

0%
1983 1991 1999 2007 2015

Source: EIA, International Energy Outlook 2018

Dr. Linda Capuano, CSIS

IEO2018, July 2018 10
Industrial sector growth is projected to result in energy consumption differences
Chinese delivered energy consumption in 2040
quadrillion Btu
150

52
120 52 all other
end-use
sectors
44
90
85
80 industrial
60 sector
66

30

0
No Transition IEO2018 Reference Fast Transition

Source: EIA, International Energy Outlook 2018

Dr. Linda Capuano, CSIS

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Small changes in the manufacturing share of total gross output drive larger changes in
energy consumption
sector share of total gross output in 2040
percent
100% mining
agriculture

75% 41% services

46% 48%

50%

40%
39% 38% manufacturing
25%

17% 12% construction

11%
0%
No Transition IEO2018 Reference Fast Transition

Source: EIA, International Energy Outlook 2018

Dr. Linda Capuano, CSIS

IEO2018, July 2018 12
China’s economic growth in the side cases leads to gains in its share of global energy-
intensive goods production
region share of global energy-intensive sector gross output in 2040
percent
100%
20% 22% 20% Rest of World

75% 7% 7% 7% United States

7% 8% 7% Middle East
10% 11% other non-OECD Asia
11%
50% 15% 16% India
16%

25%
41% 35% 40% China

0%
No Transition IEO2018 Reference Fast Transition

Source: EIA, International Energy Outlook 2018

Dr. Linda Capuano, CSIS

IEO2018, July 2018 13
India’s per capita income and energy consumption continue to lag other major economies
IEO2018 Reference case
energy consumption per capita
million Btu per person
400 2000---------2015---------2040 IEO2018 Reference case projection

350
300 United States
South Korea
250
Russia
200
150
100 China

50 India
0 Africa
0 20,000 40,000 60,000 80,000
GDP per capita
2010 U.S. dollars per person
Source: EIA, International Energy Outlook 2018

Dr. Linda Capuano, CSIS

IEO2018, July 2018 14
Differences in energy consumption between India’s high-growth cases are small
Indian energy consumption in 2040
quadrillion Btu

70

23 all other
60 23 23 end-use
sectors
50
19
40 industrial
41 43 sector
40
30
31
20

10

0
IEO2018 Reference Consumption-led Investment-led Export-led

Source: EIA, International Energy Outlook 2018

Dr. Linda Capuano, CSIS

IEO2018, July 2018 15
When starting from similar levels of GDP per person, India’s energy-intensive
production does not reach historic Chinese production levels until after 2035
energy-intensive manufacturing gross output
2010 U.S. dollar index, selected start year = 100
India (Export-led) 2040
900 China
2006–2040
2000–2015
800
2015 2037
700
600
500
400
300
200
2000
100
2006
0

Source: EIA, International Energy Outlook 2018

Dr. Linda Capuano, CSIS

IEO2018, July 2018 16
Services are the largest share of GDP for six countries that represent nearly two-thirds
of African GDP

Country Services share Manufacturing share

South Africa 71% 13%

Morocco 62% 16%
Nigeria 59% 9%
Egypt 52% 13%
Algeria 44% 5%
Angola 44% 5%

Source: IHS Markit and Oxford Economics

Dr. Linda Capuano, CSIS

IEO2018, July 2018 17
Faster economic growth in Africa leads to an increased share for the manufacturing
sector and a lower share for services compared with the IEO2018 Reference case
sector share of total gross output in 2040
percent
100%
7% 9% mining
10% 11% agriculture
75%

37% services
47%
50%

24% manufacturing
25% 19%

18% 20% construction

0%
IEO2018 Reference Africa High Growth

Source: EIA, International Energy Outlook 2018

Dr. Linda Capuano, CSIS

IEO2018, July 2018 18
Manufacturing energy consumption increases more than nonmanufacturing energy
consumption when compared with the IEO2018 Reference case in 2040
industrial sector energy consumption in 2040
quadrillion Btu

Energy-intensive 4.9 Africa High Growth

manufacturing 3.9 IEO2018 Reference

Nonenergy-intensive 10.9
manufacturing 7.9

2.7
Nonmanufacturing
2.2

0 2 4 6 8 10 12

Source: EIA, International Energy Outlook 2018

Dr. Linda Capuano, CSIS

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Key IEO2018 questions for panelists
• What is surprising?

• What is expected?

• What are your insights?

• Which topics would you explore more deeply?

Dr. Linda Capuano, CSIS

IEO2018, July 2018 20
For more information
U.S. Energy Information Administration home page | www.eia.gov
International Energy Outlook | www.eia.gov/ieo
Short-Term Energy Outlook | www.eia.gov/steo
Annual Energy Outlook | www.eia.gov/aeo
International Energy Statistics database | www.eia.gov/ies

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Dr. Linda Capuano, CSIS

IEO2018, July 2018 21