Economist Intelligence Unit (EIU) has released its Energy in 2023 report which assesses the growth prospects, top risks and key trends facing the sector next year.
The report finds that total energy consumption across the 69 countries covered by EIU’s Industry service will rise by just 1.3 per cent in 2023. This will be the second consecutive year of sluggish consumption growth. In 2022, EIU estimates that demand grew by only 0.9 per cent, amid record-high prices and a contraction in gas and oil supplies from Russia.
Nicolas Daher, lead energy analyst at EIU, said: “With the global economy slowing and energy prices remaining high, energy demand will have sluggish growth in 2023 for the second consecutive year. Despite decarbonisation targets, coal consumption will grow to compensate for gaps in gas supplies. It is likely that droughts will affect hydropower generation, as they did in 2022, prompting governments to burn more fossil fuels to compensate for the decline.
“At the same time the current energy crisis will push some governments to backtrack on efforts to phase out the use of nuclear power. Although investment will weaken, renewable energy consumption will surge by about 11 per cent, with Asia leading the way.”
According to the report, global natural gas consumption will remain flat in 2023 as it continues to decline in Europe and remains flat in North America, offsetting gains in the rest of the world. EIU does not expect gas consumption in Europe (excluding Russia) to return to pre-war levels during its forecast period of 2022-31. However, gas demand in Asia will rise by 2.4 per cent in 2023, with the region on track to become the largest global market for natural gas by 2027.
If there will be a colder-than-normal winter it will increase household gas consumption, possibly derailing Europe’s plans to reduce gas consumption. Without Russian supply, increased household demand will dry up storages, prompting the rationing of energy to the industrial sector.
Energy-intensive industries would be worst hit, with knock-on effects further down the supply chain. Failure to conserve gas in the upcoming winter months will lead European governments to increase coal-fired power generation, hindering the region’s efforts to combat climate change.
Additionally, energy shortage in Europe will keep gas prices higher for longer than expected in 2023, increasing the import bills of many commodity importers, especially in Asia and Africa.
Meanwhile, EIU expects oil consumption to grow by 1.4 per cent, mainly in Asia where usage will expand by 2.9 per cent. However, oil demand in Europe will contract by 1 per cent as economic activity slows down and the EU embargo on Russian oil imports becomes fully effective.
The Energy in 2023 report can be accessed here. The full Industries in 2023 report can be viewed here.
