By Barney Smith

The 71st BP Annual Statistical Survey was released in mid-year, as last year. It is important to be clear that the BP Statistical Survey is not a single company’s forecast of how the situation might be, it is rather the best available cumulative “snapshot” of 2021 and how its prospects and challenges turned out. We do not need an expert to tell us that the global situation is far from ideal, but the BP chief economist’s introduction to the 71st survey leaves little room for misunderstanding:

 “The challenges and uncertainties facing the global energy system are at their greatest for almost 50 years, at the time of the last great energy shocks of the 1970s. Most immediate is the impact of the terrible events taking place in Ukraine…the war also threatens to lead to shortages in food and energy …and points to the continuing importance of energy ‘security’ and ‘affordability’ alongside ‘lower carbon’ when addressing the energy trilemma.”

“This immediate challenge sits alongside the need for the world to achieve a deep and rapid decarbonisation consistent with meeting the Paris climate goals. Considerable progress has been made in sovereign pledges to achieve net zero, but in global aggregate terms those growing ambitions have yet to translate into tangible progress on the ground: carbon emissions have risen in every year since the Paris goals were agreed (other than in 2020 at the height of the COVID-19 pandemic). The world remains on an unsustainable path.”

Image by Mohamed Hassan from Pixabay

Overall, primary energy grew by 31 Exajoule (EJ) in 2021, the largest increase in history and more than reversing the sharp decline seen in 2020. Primary energy in 2021 was 8 EJ above 2019 levels (One Exajoule is equal to 277.778 terrawatt hours). The increase in primary energy in 2021 was driven by emerging economies, which increased by 13 EJ, with China expanding by 10 EJ. Since 2019, primary energy consumption in emerging economies has increased by 15 EJ, largely reflecting growth in China (13 EJ).

In contrast, energy demand in developed economies in 2021 was 8 EJ below 2019 levels. It is encouraging that the increase in primary energy between 2019 and 2021 was entirely driven by renewable energy sources. For the level of fossil fuel energy consumption was unchanged between 2019 and 2021, with lower oil demand (-8 EJ) offset by higher natural gas (5 EJ) and coal (3 EJ) consumption.

The survey picks out some more detailed information. It continues the welcome innovation of including a section on some rare metals which will be even more important in the future, pointing out that while production of cobalt (still over 70 per cent from the DRC alone) had only increased by some four per cent, production of lithium, (needed for batteries, electric cars, phones,etc) had increased by twenty-seven per cent from nearly 80,000 tonnes, to over 100,000 tonnes a year (with over half coming from Australia).

But the real story is not the increase in production, but in the spectacular price increase in those same rare metals: in 2021, the increase was 63 per cent in the case of cobalt, to reach an average of $51,000/tonne, and 58 per cent in the case of lithium carbonate, to reach an average of $11,000/tonne. In 2022, prices continued to increase even more dramatically. In particular, the lithium carbonate price soared more than 400 per cent in the first five months of this year, to a record level of $54,000/tonne.

But of more importance and wider significance was the fact that during 2021 the price of natural gas also soared,quadrupling in Europe, tripling in Asia and doubling in the US. BP tells us that in mid-2022 the price had increased by up to four hundred per cent. This makes it very difficult to see how an energy transition can be successfully achieved without some idea of how long oil (and gas!) will remain important.

More in keeping with our expectations is the fact that in 2021 the share of renewables (excluding hydro) in global power generation continued its rising trend, driven by strong expansion in solar and wind energy. Renewables now constitute nearly 13 per cent of all power generation, higher than nuclear (9.8 per cent).