World Energy and Economic Outlook
The IEO2005 projections indicate continued growth in world
energy use, including large increases for the emerging economies of
Asia. Energy resources are thought to be adequate to support the
growth expected through 2025.
![Figure 7. World Marketed Energy Consumption, 1970-2025 (Quadrillion Btu). Need help, contact the National Energy Information Center at 202-586-8800.](../Local%20Settings/Temporary%20Internet%20Files/Content.IE5/IL6FOD2H/images/figure_7small.jpg)
Figure Data |
Table 1. World Marketed Energy
Consumption by Region, 1990-2025
(Quadrillion Btu)
Printer friendly version
Region |
1990 |
2002 |
2015 |
2025 |
Average Annual Percent
Change |
1990-2002 |
2002-2025 |
Mature Market Economies
|
183.6
|
213.5
|
247.3
|
271.8
|
1.3
|
1.1
|
Transitional Economies
|
76.2
|
53.6
|
68.4
|
77.7
|
-2.9
|
1.6
|
Emerging Economies |
88.4
|
144.3
|
237.8
|
295.1
|
4.2
|
3.2
|
Asia |
51.5
|
88.4
|
155.8
|
196.7
|
4.6 |
3.5 |
Middle East |
13.1
|
22.0
|
32.4
|
38.9
|
4.4 |
2.5 |
Africa |
9.3
|
12.7
|
19.3
|
23.4
|
2.7 |
2.7 |
Central and South America
|
14.5
|
21.2
|
30.4
|
36.1
|
3.2 |
2.3 |
Total World |
348.2
|
411.5
|
553.5
|
644.6
|
1.4
|
2.0
|
|
![Figure 8. World Marketed Energy Use by Region, 1970-2025 (Quadrillion Btu). Need help, contact the National Energy Information Center at 202-586-8800.](../Local%20Settings/Temporary%20Internet%20Files/Content.IE5/IL6FOD2H/images/figure_8small.jpg)
Figure Data |
![Figure 9. Marketed Energy Use in the Emerging Economies by Region, 1970-2025 (Quadrillion Btu). Need help, contact the National Energy Information Center at 202-586-8800.](../Local%20Settings/Temporary%20Internet%20Files/Content.IE5/IL6FOD2H/images/figure_9small.jpg)
Figure Data |
![Figure 10. World Marketed Energy Use by Fuel Type, 1970-2025 (Quadrillion Btu). Need help, contact the National Energy Information Center at 202-586-8800.](../Local%20Settings/Temporary%20Internet%20Files/Content.IE5/IL6FOD2H/images/figure_10small.jpg)
Figure Data |
![Figure 11. Comparison of IEO2004 and IEO2005 Projections for the U.S. Refiner Acquisition Cost of Imported Crude Oil, 1970-2025 (2003 Dollars per Barrel). Need help, contact the National Energy Information Center at 202-586-8800.](../Local%20Settings/Temporary%20Internet%20Files/Content.IE5/IL6FOD2H/images/figure_11small.jpg)
Figure Data |
![Figure 12. Comparison of IEO2004 and IEO2005 Projections for World Coal Consumption by Region, 2015 and 2025 (Billion Short Tons). Need help, contact the National Energy Information Center at 202-586-8800.](../Local%20Settings/Temporary%20Internet%20Files/Content.IE5/IL6FOD2H/images/figure_12small.jpg)
Figure Data
|
![Figure 13. Fuel Shares of World Electricity Generation, 2002-2025 (Percent of Total). Need help, contact the National Energy Information Center at 202-586-8800.](../Local%20Settings/Temporary%20Internet%20Files/Content.IE5/IL6FOD2H/images/figure_13small.jpg)
Figure Data
|
![Figure 14. Comparison of IEO2004 and IEO2005 Projections for World Nuclear Generating Capacity, 2010-2025 (Gigawatts). Need help, contact the National Energy Information Center at 202-586-8800.](../Local%20Settings/Temporary%20Internet%20Files/Content.IE5/IL6FOD2H/images/figure_14small.jpg)
Figure Data
|
Table 2. Average Annual Growth in
World Gross Domestic Product by Selected Countries and Regions,
1979-2025
(Percent per Year)
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Region |
History |
Projections |
1979-2002
|
2002 |
2003 |
2004 |
2005 |
2005-2015
|
2015-2025
|
2002-2025
|
Mature Market Economies
|
2.6
|
1.4
|
2.1
|
3.4
|
2.8
|
2.6
|
2.4
|
2.5
|
United States |
2.9 |
1.9 |
3.0 |
4.4 |
3.6 |
3.1 |
2.9 |
3.1 |
Canada |
2.8 |
3.4 |
2.0 |
3.0 |
3.3 |
2.8 |
2.0 |
2.4 |
Mexico |
2.7 |
0.7 |
1.3 |
4.0 |
3.7 |
3.9 |
4.1 |
3.9 |
Japan |
2.5 |
-0.3 |
2.5 |
4.1 |
2.0 |
1.7 |
1.2 |
1.7 |
Western Europe |
2.3 |
1.1 |
0.9 |
2.2 |
2.1 |
2.1 |
2.0 |
2.0 |
Australia/New Zealand |
3.2 |
4.0 |
3.0 |
3.8 |
3.2 |
2.6 |
2.4 |
2.6 |
Transitional Economies
|
-0.5
|
4.4
|
6.6
|
7.0
|
6.2
|
4.5
|
3.7
|
4.4
|
Former Soviet Union |
-1.0 |
5.2 |
7.9 |
7.8 |
6.7 |
4.6 |
3.7 |
4.6 |
Eastern Europe |
0.9 |
2.7 |
3.7 |
5.1 |
4.9 |
4.3 |
3.8 |
4.1 |
Emerging Economies |
5.0
|
4.8
|
5.9
|
6.4
|
5.9
|
5.3
|
4.7
|
5.1
|
Emerging Asia |
6.8 |
5.9 |
7.3 |
6.9 |
6.4 |
5.7 |
4.9 |
5.5 |
China |
9.4 |
8.0 |
9.1 |
8.6 |
7.2 |
6.4 |
5.3 |
6.2 |
India |
5.6 |
4.6 |
8.2 |
5.7 |
6.4 |
5.4 |
5.2 |
5.5 |
South Korea |
6.7 |
6.9 |
3.1 |
4.3 |
5.8 |
4.8 |
2.8 |
3.9 |
Other Asia |
5.4 |
4.1 |
4.8 |
5.8 |
5.1 |
4.8 |
4.3 |
4.6 |
Middle East |
2.4 |
4.8 |
3.1 |
7.4 |
6.2 |
4.4 |
3.9 |
4.3 |
Africa |
2.4 |
3.4 |
3.9 |
4.6 |
5.0 |
4.2 |
3.6 |
4.0 |
Central and South America
|
2.2 |
-0.5 |
1.2 |
4.1 |
3.7 |
4.0 |
4.0 |
3.9 |
Brazil |
2.4 |
1.9 |
-0.2 |
4.3 |
3.8 |
3.9 |
4.0 |
3.8 |
Total World |
|
|
|
|
|
|
|
|
Purchasing Power Parity
Rates |
3.0
|
2.9
|
3.9
|
4.9
|
4.3
|
3.9
|
3.6
|
3.9
|
Market Exchange Rates
|
2.7
|
2.0
|
2.3
|
3.1
|
3.4
|
3.1
|
3.0
|
3.0
|
|
The International Energy Outlook 2005 (IEO2005)
projects strong growth for worldwide energy demand over the 23-year
projection period from 2002 to 2025. Total world consumption of
marketed energy is expected to expand from 412 quadrillion British
thermal units (Btu) in 2002 to 553 quadrillion Btu in 2015 and then to
645 quadrillion Btu in 2025, or a 57-percent increase over the 2002 to
2025 time period (Table 1 and Figure 7).
In the IEO2005 mid-term outlook, the emerging economies
account for nearly two-thirds of the increase in world energy use,
surpassing energy use in the mature market economies for the first
time in 2020 (Figure 8). In 2025, energy demand in the emerging
economies is expected to exceed that of the mature market economies by
9 percent.
Much of the growth in energy demand among the emerging economies is
expected to occur in emerging Asia, which includes China and India;
demand in this region is projected to more than double over the
forecast period (Figure 9). Primary energy consumption in the emerging
economies as a whole is projected to grow at an average annual rate of
3.2 percent between 2002 and 2025. In contrast, in the mature market
economies— where energy consumption patterns are well
established—energy use is expected to grow at a much slower average
rate of 1.1 percent per year over the same period. In the transitional
economies of Eastern Europe and the former Soviet Union (EE/FSU),
growth in energy demand is projected to average 1.6 percent per year.
This chapter presents an overview of the IEO2005 outlook for
energy consumption by primary energy source and a look at the major
assumptions that form the basis of the forecasts that appear in the
report. The chapter includes a discussion of the IEO2005
macroeconomic forecast in the context of recent economic developments
in key mature market, transitional, and emerging economies.
As with any set of forecasts, there is uncertainty associated with
the IEO2005 energy projections. In an effort to assess issues
of uncertainty in the forecast, the following section considers some
of the elements that drive the IEO2005 projections, which can
result in a fair amount of variation in forecasting. Alternative
assumptions about economic growth and their impacts on the IEO2005
projections are considered, as well as the possible effects of future
trends in energy intensity on the reference case projections.
Outlook for World Energy Consumption
The IEO2005 reference case projects increased consumption of
primary energy from all sources over the next two decades. Fossil
fuels continue to supply much of the increment in marketed energy use
worldwide throughout the forecast. Oil is expected to remain the
dominant energy source over the projection period, with its share of
total world energy consumption declining only slightly, from 39
percent in 2002 to 38 percent in 2025 (Figure 10).
Worldwide oil consumption is expected to rise from 78 million
barrels per day in 2002 to 103 million barrels per day in 2015 and
then to 119 million barrels per day in 2025. The projection for oil
demand in 2025 is slightly lower than the 121 million barrels per day
forecast in the International Energy Outlook 2004 (IEO2004),
and the difference is in large part explained by the change in
expectations for world oil prices (Figure 11). In this year’s outlook,
world oil prices are assumed to stay higher for longer than
anticipated in last year’s report, and this dampens the mid-term
projections for oil demand in many regions of the world—especially in
the mature market economies and the EE/FSU. The impact of higher
prices on world oil demand would be even stronger without the robust
growth expected for China in the near-term forecast. China’s oil
consumption is projected to increase at an average annual rate of 5.8
percent between 2002 and 2015, then slow to about half that rate in
the remaining years of the forecast.
Worldwide, transportation and industry are the major growth sectors
for oil demand. On a worldwide basis, the transportation sector—where
there are currently no alternative fuels that compete widely with oil—
accounts for about 60 percent of the total projected increase in oil
use between 2002 and 2025, with the industrial sector accounting for
virtually all the rest of the incremental demand.
Natural gas is projected to be the fastest growing primary energy
source worldwide, maintaining average growth of 2.3 percent annually
over the 2002 to 2025 period. Total world natural gas consumption is
projected to rise from 92 trillion cubic feet in 2002 to 128 trillion
cubic feet in 2015 and 156 trillion cubic feet in 2025.
Natural gas is expected to remain an important supply source for
new electric power generation in the forecast. It is seen as a
desirable option for electric power in many parts of the world, given
its efficiency relative to other energy sources and its low carbon
content relative to other fossil fuels, making it a more attractive
choice for countries interested in reducing greenhouse gas emissions.
The industrial sector also remains an important end-use consumer for
natural gas worldwide. The electric power sector accounts for nearly
50 percent of the increase in global natural gas demand over the 2002
to 2025 period, and the industrial sector accounts for another 36
percent.
Coal use worldwide is projected to increase by 2.0 billion short
tons between 2002 and 2015 and by another 1.0 billion short tons
between 2015 and 2025. In this year’s outlook for coal, all regions of
the world show some increase in coal use, except for Western Europe,
where natural gas and, to a lesser extent, renewable energy sources
are increasingly being substituted for coal to fuel electric power
generation. On a regional basis, slightly lower coal use is
anticipated relative to last year’s outlook in the mature market
economies. In the transitional economies of the EE/FSU region, coal
use was expected to decline somewhat in the IEO2004 forecast,
but in this year’s forecast it is expected to increase by 0.5 percent
per year between 2002 and 2025.
The IEO2005 forecast for coal use in the emerging economies
is nearly 13 percent higher than in IEO2004 (Figure 12). The
largest increases in coal use worldwide are projected for China and
India, where coal supplies are plentiful. Together, China and India
account for 87 percent of the projected rise in coal use in the
emerging economies region and 72 percent of the total world increase
in coal demand over the forecast period.
Electricity generation is expected to nearly double between 2002
and 2025, from 14,275 billion kilowatthours to 26,018 billion
kilowatthours. The strongest growth in net electricity consumption is
projected for the emerging economies of the world, averaging 4.0
percent per year in the IEO2005 reference case, compared with a
projected average increase of 2.6 percent per year worldwide. Robust
economic growth in many of the emerging economies is expected to boost
demand for electricity to run newly purchased home appliances for air
conditioning, cooking, space and water heating, and refrigeration.
More modest growth, averaging 1.5 percent per year, is projected for
the mature market economies.
As noted above, natural gas is expected to be a favored choice for
new electricity generation capacity built over the next two decades
(Figure 13). Its relative environmental benefits and efficiency make
natural gas an attractive alternative to coal-fired generation.
Moreover, where fuel diversification is desired (as in China, where
generation is heavily reliant on coal-fired capacity), natural gas is
expected to gain share in the electric power mix over the forecast
period. The natural gas share of total energy used to generate
electricity worldwide increases in the forecast, from 18 percent in
2002 to 24 percent in 2025, with other energy sources showing small
losses in market share.
Worldwide, consumption of electricity generated from nuclear power
is expected to increase from 2,560 billion kilowatthours in 2002 to
3,032 billion kilowatthours in 2015 and 3,270 billion kilowatthours in
2025. The IEO2005 world forecast for nuclear electricity
generation is, in general, more optimistic than last year’s forecast;
the projection for nuclear generation in 2025 is 13 percent higher in
IEO2005 than it was in IEO2004. Prospects for nuclear
power have improved in recent years, with higher capacity utilization
rates reported for many existing nuclear facilities and expectations
that most existing plants in the mature market and transitional
economy nations will receive approvals for extensions of their
operating lives.
Higher fossil fuel prices and the entry into force of the Kyoto
Protocol are expected to improve prospects for new nuclear power
capacity over the forecast period, and the world nuclear generation
forecast includes new construction of nuclear plants in several
countries. In IEO2005, unlike past IEOs, the world’s
total installed nuclear capacity is not projected to decline before
2025 (Figure 14). In the IEO2005 reference case, world nuclear
capacity is projected to rise from 361 gigawatts in 2002 to 401
gigawatts in 2015 and 422 gigawatts in 2025.
In the emerging economies, consumption of electricity from nuclear
power is projected to increase by 4.9 percent per year between 2002
and 2025. Emerging Asia, in particular, is expected to see the largest
increment in installed nuclear generating capacity over the forecast,
accounting for 96 percent of the total projected increase in nuclear
power capacity for the emerging economies. Of the 55 gigawatts of
additional installed nuclear generating capacity projected for
emerging Asia, 24 gigawatts is projected for China, 12 gigawatts for
India, and 12 gigawatts for South Korea.
Although the use of hydroelectricity and other grid-connected
renewable energy sources is expected to continue to expand over the
projection period, increasing by 1.9 percent per year, more rapid
growth is projected for both natural gas and coal demand in the
reference case. Still, renewables are expected to retain an 8-percent
share of total world energy consumption throughout the 2002 to 2025
period. Much of the growth in renewable energy sources is expected to
result from large-scale hydroelectric power projects in the developing
world, particularly among the nations of emerging Asia. China, India,
and Laos, among other emerging Asian economies, are already
constructing or have plans to construct ambitious hydroelectric
projects in the coming decades.
World Economic Outlook
Economic growth is among the most important factors to be
considered in projecting changes in the world’s future energy
consumption. In the IEO2005 forecast, assumptions about
regional economic growth—measured in terms of gross domestic product
(GDP), in real 2000 U.S. dollars at purchasing power parity rates—
underlie the projections of regional energy demand (see
discussion on "GDP Comparisons Based on Purchasing Power Parity
Exchange Rates").
Over the 2002 to 2025 period, world economic growth is projected to
average 3.9 percent annually (Table 2). This growth projection is
slightly higher than the IEO2004 projection, because economic
performance in most regions of the world was exceptionally strong in
2003 and 2004. The medium- to long-term outlook for worldwide economic
growth depends on the underlying demographic and productivity trends
in each economy, which will determine the nature and character of
long-term growth, especially in developed, mature market economies
that have well-established and stable political institutions and
markets for goods and services, labor, and financial assets.
In emerging nations that still are in the process of building human
and physical capital infrastructures, establishing credible and
effective regulatory mechanisms to govern markets, and ensuring
political stability, progress in achieving those goals will play an
equally important role in determining medium- to long-term growth. The
transitional economies face their own unique sets of problems as they
continue moving from centrally planned to decentralized private
markets. Therefore, in contrast to the mature market economies, there
is a broader range of uncertainty around the reference case
projections of economic growth for emerging and transitional
economies.
Mature Market Economies
In the United States, GDP is projected to grow by an average of 3.1
percent per year between 2005 and 2015, with somewhat slower
growth—2.9 percent per year— expected between 2015 and 2025 as the
baby boom generation retires and labor force growth slows. Compared
with the second half of the 1990s, U.S. GDP growth rates were lower
from 2000 to 2002 but rebounded to 3.0 percent in 2003 and an
estimated 4.4 percent in 2004. In the forecast, the U.S. economy
stabilizes at its long-term growth path between 2005 and 2010.
Canada has the potential to maintain strong growth in productivity
and its standard of living by increasing the labor force participation
rate, focusing on immigration, strengthening policies on education and
innovation, and reducing structural unemployment. Labor force growth
is projected to slow in the medium to long term, however, and Canada’s
overall potential economic growth is expected to fall from the current
3.0 percent to 2.8 percent per year between 2005 and 2015 and 2.0
percent per year between 2015 and 2025.
In the IEO2005 reference case, Mexico’s GDP is projected to
grow by an average of 3.9 percent per year from 2002 to 2025. Global
financial markets remain friendly to Mexico in terms of the
availability and cost of credit and the volume of foreign direct
investment. In general, strong trade ties with the United States are
expected to help cushion Mexico from deeper economic troubles. By the
same token, Mexico’s future growth is also more dependent on U.S.
growth.
Western Europe’s GDP is projected to grow by 2.0 percent per year
between 2002 and 2025 in the reference case. Over the medium to long
term there are structural impediments to economic growth in many
Western European countries, related to the region’s labor markets,
product markets, and costly social welfare systems. Reforms to improve
the competitiveness of European labor and product markets could yield
significant dividends in terms of increases in regional output [1].
Japan’s GDP growth is projected to average 1.7 percent per year
from 2002 to 2015 and then to slow to 1.2 percent per year from 2015
to 2025. In the short term, Japan’s highly skilled labor force and
strong work ethic are expected to support the projected growth rate of
1.7 percent per year, provided that more flexible labor policies
allowing greater mobility for workers are adopted. Toward the end of
this decade, normal attrition is expected to eliminate surplus
employment levels, especially in the industrial sector, allowing
consolidation and improved efficiencies. More importantly, the
bankrupt firms kept afloat by creditors are expected to be gone and,
therefore, no longer a drain on the economy. In addition, the bad
loans that have plagued Japan’s banks are expected to be reduced to a
point at which lending can resume. In the long term, after 2010,
Japan’s population is expected to decline, and the average age will
continue to rise as a result of low birth rates and high longevity. As
a result, transfer payments by the government to the elderly could
become increasingly burdensome, leading to slower GDP growth.
Transitional Economies
Over the 2002-2025 period, an average annual growth of 4.6 percent
is expected for the FSU as a whole. For the past several years, the
FSU economies have been largely sheltered from global economic
uncertainties, recording strong growth in each year since 2000. This
trend is largely the result of robust domestic demand, in addition to
the impact that rising oil prices have had on the oil-exporting
nations of the region. High world oil prices have stimulated
investment outlays, especially in the energy sector of the Caspian
region. Given the volatility of energy market prices, however, it is
unlikely that these economies will be able to sustain the growth rates
recently achieved until diversification from energy becomes more
broadly based. The long-term growth prospects of the FSU economies
hinge on their success in economic diversification, as well as further
improvements in domestic product and financial markets.
An average annual expansion of 4.1 percent per year is projected
for Eastern Europe’s GDP over the 2002 to 2025 period. The accession
of 10 Eastern European countries to membership in the European Union
in May 2004 (Poland, Czech Republic, Slovakia, Hungary, Estonia,
Latvia, Lithuania, Slovenia, Malta, and Cyprus) is expected to boost
consumer confidence and economic activity in the medium to long term.
Membership in the European Union is expected to result in more foreign
direct investment, bolstering domestic investment and growth.
Emerging Economies
Much of the growth in world economic activity between 2002 and 2025
is expected to occur among the nations of emerging Asia, where
regional GDP is projected to grow by 5.5 percent per year. China,
emerging Asia’s largest economy, is expected to continue playing a
major role on both the supply and demand sides of the global economy.
IEO2005 projects an average annual growth rate of approximately
6.2 percent for China’s economy over the 2002 to 2025 period. The
country’s economic growth is expected to be the highest in the world.
In 2025, based on share of world GDP (converted using purchase power
parity rates), China is expected to be the world’s largest economy.
In terms of structural issues that have implications for the medium
to long term, China still needs to reform overstaffed and inefficient
state-owned companies and a banking system that is carrying a
significant amount of nonperforming loans. Membership in the World
Trade Organization is expected to force the government to pursue these
reforms, which are expected to transform the Chinese economy into one
that is more market oriented and, hence, more efficient.
Another Asian country with a rapidly emerging economy is India. The
mid-term prospects for India’s economy are positive, as it continues
to privatize state enterprises and increasingly adopts free market
policies. Average annual GDP growth in India over the 2002 to 2025
forecast period is projected at 5.5 percent. Accelerating structural
reforms—including ending regulatory impediments to the consolidation
of labor-intensive industries, labor market and bankruptcy reforms,
and agricultural and trade liberalization—remain essential to
stimulating potential growth and reducing poverty in the medium to
long term [2]. With its vast and cheap labor force,
India is well placed to reap the benefits of globalization in the long
run.
Although the nations of Central and South America are on favorable
economic growth paths, the region’s growth rate remains well below
potential. The weak international credit environment is a constraint,
as are domestic economic and/or political problems in a number of
countries. Growth in the region remains heavily dependent on the
volume of foreign capital flows. In the long term, beyond
macroeconomic stability and commitment to sound fiscal and monetary
policies, the countries of Central and South America will have to
tackle governance issues and attempt to correct severe economic
disparities between the wealthy and the poor in the region’s
societies.
Higher oil prices have helped boost growth in the oil-exporting
countries of the Middle East and Africa, and strong prices for many
other commodities have helped a number of the region’s
commodity-exporting countries. For Africa as a whole, average annual
GDP growth of 4.0 percent is projected over the 2002 to 2025 period.
In the longer run, Africa will continue to face formidable obstacles
to growth, such as low savings and investment rates, limited quantity
and quality of infrastructure and human capital, negative perceptions
on the part of international investors, and especially the impact of
HIV/AIDS on population growth.
Alternative Growth Cases
Expectations for the future rates of economic growth are a major
source of uncertainty in the IEO2005 forecast. To account for
the uncertainties associated with economic growth trends, IEO2005
includes a high economic growth case and a low economic growth case in
addition to the reference case. The reference case projections are
based on a set of regional assumptions about economic growth
paths—measured by GDP—and energy elasticity (the relationship between
changes in energy consumption and changes in GDP). The two alternative
growth cases are based on alternative assumptions about possible
economic growth paths; assumptions about the elasticity of energy
demand are held constant, at reference case values.
For the high and low economic growth cases, different assumptions
are made about the range of possible economic growth rates among the
industrial, transitional EE/FSU, and emerging economies. For the
mature market economies, 0.5 percentage point is added to the
reference case GDP growth rates for the high economic growth case and
0.5 percentage point is subtracted from the reference case GDP growth
rates for the low economic growth case. Outside the industrialized
world (excluding the FSU), reference case GDP growth rates are
increased and decreased by 1.0 percentage point to provide the high
and low economic growth case estimates.
The FSU suffered a severe economic collapse in the early part of
the 1990s and, until recently, has shown wide variation in its
year-to-year economic growth. Between 1990 and 2002, its annual GDP
growth rate has varied from -14 percent in 1992 to +9 percent in 2000.
Given this wide range, the FSU nations can be characterized as having
a considerably more uncertain economic future than the nations in
other regions of the world. As a result, 1.5 percentage points are
added and subtracted from the reference case GDP assumptions to derive
the high and low macroeconomic forecasts for the FSU region.
The IEO2005 reference case shows total world energy
consumption reaching 645 quadrillion Btu in 2025, with the mature
market economies projected to consume 272 quadrillion Btu, the
transitional EE/FSU countries 78 quadrillion Btu, and the emerging
economies 295 quadrillion Btu. In the high economic growth case, total
world energy use in 2025 is projected to be 708 quadrillion Btu, 64
quadrillion Btu (or 32 million barrels oil equivalent per day) higher
than in the reference case. Under the assumptions of the low economic
growth case, worldwide energy consumption in 2025 is projected to be
58 quadrillion Btu (29 million barrels oil equivalent per day) lower
than in the reference case, at 586 quadrillion Btu. Thus, there is a
range of 122 quadrillion Btu—about one-fifth of the total consumption
projected for 2025 in the reference case—between the projections in
the high and low economic growth cases (Figure 15).
Trends in Energy Intensity
Another major source of uncertainty surrounding long-term forecasts
is the relationship of energy use to GDP—or energy intensity—over
time. Economic growth and energy demand are linked, but the strength
of that link varies among regions over time. In the mature market
economies, history shows the link to be a relatively weak one, with
energy demand lagging behind economic growth (Figure 16). In the
emerging economies, demand and economic growth have been closely
correlated with energy demand growth for much of the past three
decades (Figure 17). Economic growth has only recently (that is,
within the past decade or so) begun to outpace growth in energy use
among the emerging economies of the world.
The historical behavior of energy intensity in the FSU is
problematic. Since World War II, the EE/FSU economies have had higher
levels of energy intensity than either the mature market or emerging
economies. In the FSU, however, energy consumption generally grew more
quickly than GDP until 1990 (Figure 18), when the collapse of the
Soviet Union created a situation in which both income and energy use
declined, but GDP fell more quickly and, as a result, energy intensity
increased. Only since the late 1990s, after the 1997 devaluation of
the Russian ruble, have the Russian and Ukrainian industrial sectors
begun to strengthen. As a result, economic growth in the FSU has begun
to outpace growth in energy use significantly, and energy intensity
has begun to decline precipitously. Over the forecast horizon, energy
intensity in the EE/FSU region is expected to continue to decline but
still remain higher than in any other region of the world (Figure 19).
The stage of economic development and the standard of living of
individuals in a given region strongly influence the link between
economic growth and energy demand. Advanced economies with high living
standards have a relatively high level of energy use per capita, but
they also tend to be economies where per capita energy use is stable
or changes very slowly. In mature market economies, there is a high
penetration rate of modern appliances and motorized personal
transportation equipment. To the extent that spending is directed to
energy-consuming goods, it involves more often than not purchases of
new equipment to replace old capital stock. The new stock is often
more efficient than the equipment it replaces, resulting in a weaker
link between income and energy demand.
The pace of improvement in energy intensity may change, given
different assumptions of macroeconomic growth over time. Faster growth
in income means a faster rate of decline in energy intensity.
Worldwide energy intensity in the IEO2005 high economic growth
rate is projected to improve by 2.1 percent per year on average from
2002 to 2025, compared with 1.9 percent in the reference case. On the
other hand, slower economic growth would result in a slower rate of
decline in energy intensity. Under the IEO2005 assumptions for
GDP growth in the low macroeconomic growth case, world energy
intensity is projected to decline by an average of only 1.5 percent
per year over the projection period.
References
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