Monday, December 3, 2018

Another Day...Another View of Energy Consumption and Population Growth

From 2013 through 2016 (the most recent data from the EIA), growth in global energy consumption has tanked.  Seems worth a bit of discussion and a quick search for a cause.  I'll use Primary Energy Consumption data, as this measures the total energy demand of a country, or in the chart below, the world.  It covers consumption of the energy sector itself, losses during transformation (for example, from oil or gas into electricity) and distribution of energy, and the final consumption by end users.

Total primary energy consumption is about the best proxy of actual changes in economic activity I know of.  Of course, some amount of decelerating demand should be due to conservation, innovation, and/or greater efficiency.  But what I will detail is no conservation effort or higher is a massive deceleration in demand that given the central bank "support", ZIRP policies, and massive debt undertaken should have been resulting in epic growth.  But, actually, not so much and this should be of huge concern as the "supports" have been reduced since 2016.

First, the changing consumption, by energy type, since 2000 (chart below).  While petroleum, natural gas, and nuclear/renewable demand continues essentially unabated, highly noteworthy is the surge in coal consumption from '00 to '13 and the declines since '13.
But the next chart details the decelerating total average change in demand, by energy type and total over the different periods.  The relatively meager demand growth during the most recent period is staggering.  While the growth in demand for petroleum and nuclear/renewable is marginally above previous periods, growth in natural gas demand fell over 50% (still growth, just half as much growth as the previous period), and of course total coal demand outright declined over 6%.  If global energy demand were growing anything like the previous periods, the decline in coal consumption would have been made up by like growth in oil, natural gas, and/or nuclear/renewables.  But as the chart highlights, growth in demand fell like a stone.
To round out the picture, changing energy consumption, on an annual basis by stacked energy types.
The chart below shows total energy consumption (blue line) from 1980 through 2016, and the brown columns show annual change in consumption.  Red arrows point out the recessions of '81, '91, '01, '09, and the present downturn.  Of note should be the dashed arrow showing decelerating growth of global energy consumption since 2010.  Growth slowed to such an extent by year end 2016, that it was nearly resembling previous periods of global recession.
The chart below breaks out the total energy consumption by groupings of nations, according to income per capita. 
  • High income nations are those with income of $12k+ (N. America, EU, Japan/S. Korea, Aus/NZ, etc = 1.2 billion persons, Consume 46% of global energy, Receive 64% of global income)
  • Upper middle income nations, $12 to $4k (China, Brazil, Russia, Mexico, etc. = 2.6 billion persons, Consume 42% of global energy, Receive 27% of global income)
  • Lower middle income nations, $4k to $1k (India, Pakistan, Nigeria, Vietnam, etc. = 3.1 billion persons, Consume 11% of global energy, Receive 8% of global income)
  • Low income nations, under $1k (sub-Saharan Africa, Afghanistan, N. Korea, Haiti, etc. = 700 million persons, Consume 0.6% of global energy, Receive less than 1% of global income)
Gross National Income Groupings
But first, putting the four groups relative income and per capita income in perspective (using World Bank Atlas method, detailed HERE).  The chart below shows the gross national income, by the same groupings.  The high income nations represent 64% of global income and the upper middle income nations another 27% while the lower middle and low income nations represent less than 9%, combined.  Not coincidentally, these breakdowns of global income, per group, line up very closely with the percentage of global energy consumed (and more broadly, global commodity consumption) by each group.
Back to global energy consumption, the chart below shows the annual change in total energy consumption, per grouping.  The current period, with all sources seeing a cessation of growth, is pretty much a first.  In fact, for the first time, the lower middle income nations are providing the primary annual energy consumption growth.The chart below details the annual change in total energy consumption, by the different groupings.  The present deceleration of growth seems to rhyme with previous periods of economic recession.
Despite the high/upper middle income nations representing just under 50% of the worlds population, they consume nearly 90% of the energy.  The decelerations seen among the wealthy nations are not being recouped by growth among the poor...likely just the opposite.  Decelerating activity among the wealthier nations is negatively impacting the poorer nations potential growth.

High income nations saw peak total energy consumption in 2007 and are still below that peak almost decade later.  Aside from the '09 consumption collapse, the 2011 through 2016 period has seen some of the feeblest growth among these nations since 1980.
Upper middle income nations below, again total consumption the blue line, annual change the brown columns, and recessions pointed out with red arrows.  The decelerating growth since 2010 is very obvious.

Lower middle income nations energy consumption, below.  Lower middle income nations are steadily, although relatively minutely growing.

As for the low income nations, below, they are more closely resembling the high income nations energy consumption and have been declining since 2010.

So, why the decelerations in energy consumption?  The chart below shows the total 0 to 64yr/old population of the high/upper middle income nations (blue line) and the annual change (red columns, data according to UN).  Annual 0 to 64yr/old population growth among the consumer nations double peaked at +38 million.  That was annually 38 million more potential employees, homebuyers, consumers, tax payers, etc.  By 2008, annual growth was down to 20 million, and as of 2018 annual population growth of those aged 0 to 64 is just 5 million.

To ensure you your money's worth, the chart below shows combined total annual population growth among the high and upper middle income nations.  Total growth is just half of what it was at peak growth in 1988 but the portion of the population growing has entirely flipped. 

Given the labor force participation rates among the different age groups, the chart below shows the potential annual growth in the workforce of the high and upper middle income nations.  Note the potential workforce is growing at just one quarter the peak.  But worse still, the pace is now less than half that of 2008...and by mid 2020's, the potential workforce will begin outright shrinking (and yes, the UN data includes and relies upon ongoing immigration just to maintain the below curves...absent that, the falloff is much sooner and steeper).
To wrap it up, the chart below shows the childbearing population (15 to 44yr/olds) of the combined high and upper middle income nations plus their combined total births (per 5yrs periods).   Total births essentially double peaked in 1970 and 1990 at about 325 million births per 5 years and have subsequently fallen to 257 million births in the '10 to '15 period.  However, in the '15 to '20 period, births will be somewhere between the mid and low variants, likely a new post-war low below 240 million per the most recent 5 year period.  Obviously with a declining number of births (including births among immigrants), the childbearing population peaked about 2010 and is now falling.  The combination of a declining childbearing population and declining fertility rates (births per 1000) means births trending between the medium and low variant estimates is the most likely outcome.
Again, despite all the debt, central bank "support", and interest rate consumption (and more broadly consumption, period) is tracking the changing population...down.
Even births in India peaked around the turn of the century and are in secular decline.  Likewise, India's childbearing population should peak somewhere around 2040.Just to round out the picture, only the low income nations continue to have more children, while all other regions have either plateaued or are in full depopulationary retreat.  The final chart shows Africa's surging births and childbearing population.
But all that population growth in Africa, India, and the poorer nations of the world just isn't translating into growth in energy consumption or economic activity due to low incomes, savings, and limited access to credit.  Chart below, showing the annual change in energy consumption of the lower middle and low income nations is the same scale as the high/upper middle income energy growth to highlight how relatively minor is the growth in the poorer nations.  And these were the good times!

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