Ameer Randolph
Fossil fuels, including coal, oil, and natural gas, have been the primary energy source for over 150 years, currently supplying about 80% of the world's energy. The demand for fossil fuels is driven by various factors, including economic activity, population growth, and international prices. While there is a growing focus on transitioning to renewable energy sources, fossil fuels continue to play a dominant role in global energy systems. This paragraph will discuss the drivers of fossil fuel demand and the challenges associated with transitioning to cleaner energy sources.
| Characteristics | Values |
|---|---|
| Population | Population growth drives demand for energy services |
| Economic Activity | Economic growth drives demand for energy services |
| International Prices | Prices of coal, natural gas, and oil impact supply and demand |
| Electricity Generation Capacity | Variable renewables and dispatchable plants affect demand |
| Fossil Fuel Consumption | Coal, oil, and gas consumption has increased significantly over time |
| Transition Away from Fossil Fuels | Renewable energy sources are driving a decline in fossil fuel demand |
| Global Energy Systems | Fossil fuels supply two-thirds of global energy demand |
| OECD Demand | Peaked in 2007, with a decline in coal, oil, and gas consumption expected |
| China's Gas Demand | Expected to increase by 40% from 2021 to 2030 |
| Aviation Fuel | Remains harder to replace with cleaner sources |
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What You'll Learn
Global energy systems
Fossil fuels have been a fundamental driver of technological, social, and economic development since the Industrial Revolution. Coal, oil, and gas have played, and continue to play, a dominant role in global energy systems.
International prices for coal, natural gas, and oil are fundamental drivers in determining fossil fuel demand and supply projections across all sectors. The International Energy Agency's Global Energy and Climate Model (GEC Model) reflects the price levels needed to stimulate sufficient investment in supply to meet projected demand. If prices are too low to encourage sufficient production to cover global demand, the price level is increased, and energy demand is recalculated.
Demand for fossil fuels must also be met by the electricity generation capacity of each region, which consists of variable renewables and dispatchable plants. Variable renewables include technologies like wind and solar PV without storage, while dispatchable plants refer to generation technologies that can be made to generate at any time except in cases of technical malfunction.
While there has been a transition away from fossil fuels in certain parts of the energy system, global fossil fuel demand is expected to continue expanding this decade. This is largely due to the expected growth in China, India, the Middle East, Africa, and major Asian emerging markets such as India, Indonesia, Vietnam, and the Philippines. For example, China's gas-fired power generation is expected to show strong growth as the country expands its capacity to reduce its dependence on coal-fired power plants. Similarly, the need for higher power demand in Asian emerging markets will continue to be met largely by coal-fired electricity.
In contrast, OECD demand for fossil fuels peaked in 2007, coal demand in 2013, industrial demand for fossil fuels in 2014, and ICE car demand in 2017. By 2019, 58% of the world by demand had already seen peak fossil fuels. The world is on track for a rapid decline in coal consumption across the power sector, with a projected 40-55% reduction from today's levels by mid-century. Oil is also expected to experience a similar decline of 20-40% through mid-century due to the electrification of ground transportation. However, this trend may slow or reverse as transport demand rises, particularly in the aviation and marine sectors where limited policy and fewer technology alternatives maintain oil's dominance as a transport fuel.
Renewable energy technologies are dramatically more efficient than fossil fuels, which are notoriously inefficient. As renewable solutions like solar, wind, EVs, heat pumps, and hydrogen enter the market, they will increase global efficiency gains and drive primary energy demand growth toward zero.
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Population growth
Fossil fuels, particularly coal and oil, have been the dominant sources of energy throughout history. They have been integral to technological advancements, social progress, and economic development. The burning of fossil fuels releases carbon dioxide (CO2), making it the largest contributor to global climate change and local air pollution. Despite the negative impacts, fossil fuels continue to be essential in various sectors.
The agricultural sector, for example, relies heavily on fossil fuels. They are used not only for powering tractors, plows, and irrigation equipment but also in the production of agricultural plastics and the refrigeration of perishables. Without fossil fuels, world food production would struggle to sustain the current population, let alone accommodate the annual net increase of over 80 million people.
Additionally, the transition to industrial agriculture has led to environmental degradation, such as deforestation, deep-sea trawling, and urban sprawl, which are all facilitated by the energy derived from fossil fuels. The demand for fossil fuels is further influenced by economic activity and population growth, as more people require more energy services. This demand is projected to increase, with global population growth expected to rise from 8 billion in 2023 to 9.7 billion by 2050.
While there is a growing focus on transitioning to renewable energy sources, population growth continues to be a significant driver of fossil fuel demand. The challenge lies in accelerating the adoption of low-carbon energy sources while addressing the energy demands of a growing global population.
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Industrial Revolution
The Industrial Revolution, which began in Britain in the middle of the 18th century, was a period of social and economic change that transformed societies, driving technological progress and economic growth. It ushered in the widespread use of fossil fuels, which became the dominant energy source for industry and households in the UK and overseas. This revolution was marked by the invention of the steam engine, which was powered by coal.
Coal was key to the Industrial Revolution as it was an abundant and powerful source of energy that was relatively easy to access and use. It replaced wood as a source of heating and was used for iron ore smelting and cement production. The use of coal also supported the rise of industry in Germany, Great Britain, the US, and Australia, and later in China, South Africa, and India. The discovery of how to create coke, a purified form of coal, in 1709, allowed for the smelting of iron ore without the use of charcoal. This discovery is seen as the starting point of the Industrial Revolution.
The use of fossil fuels during the Industrial Revolution had a profound environmental impact, marking the start of our intensive use of these fuels and the large-scale carbon emissions that continue to drive global warming. The burning of coal, in particular, led to significant air pollution, which had negative consequences for the health and mortality of those living in industrial cities. The social reformers of the 1830s were concerned about the conditions in which the urban working classes lived, which included squalor, overcrowding, and pollution from coal burning.
The Industrial Revolution also saw the discovery and increased use of oil and natural gas. Oil was already in use, mainly for lamps, but the invention of the internal combustion engine in the mid-twentieth century led to its widespread use for transportation. The World Wars further increased the demand for petroleum products, as military vehicles and warships required fuel.
The legacy of the Industrial Revolution includes a global dependency on machinery and technology powered by fossil fuels, with over 80% of global energy consumption still coming from these sources today. The shift towards industrialization and the use of fossil fuels has also led to a tenfold increase in the world's population over the last 300 years and a substantial rise in living standards. However, the environmental damage caused by the Industrial Revolution is largely irreversible, and the continued use of fossil fuels contributes to the ongoing environmental crisis.
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Climate policy
Fossil fuels are the largest contributor to global climate change, accounting for over 75% of global greenhouse gas emissions and almost 90% of carbon dioxide emissions. The Intergovernmental Panel on Climate Change (IPCC) has found that emissions from fossil fuels are the dominant cause of global warming. In 2018, 89% of global CO2 emissions came from fossil fuels and industry.
To combat this, supply-side climate policies aim to restrict the production of climate-heating fossil fuels and keep sizeable quantities of remaining reserves unexploited. This involves governments and private businesses halting the development of new fossil fuel reserves and decommissioning existing infrastructures and reserves. Supply-side policies complement demand-side policies by targeting fossil fuel production, creating synergies and co-benefits. They also provide higher certainty of emissions reductions and are simpler to implement due to fewer actors and locations to regulate.
However, the transition away from fossil fuels presents immense challenges for governments, the international climate regime, communities, and a global economy reliant on abundant fossil fuel consumption and production. Fossil fuel assets face becoming economically stranded due to shifts in relative costs, regulatory changes, and the physical impacts of climate change. Despite the need for a "managed decline," governments still plan to produce far more fossil fuels than is permissible under a 1.5°C warming trajectory.
To achieve the Paris Agreement's long-term temperature goals, fossil fuel-producing countries must align their production and export targets with climate objectives. Combining supply-side policies with demand-side policies reduces the overall cost of emission reduction goals and promotes policy coherence.
The Intergovernmental Panel on Climate Change's (IPCC) Sixth Assessment Report provides important resources for policymaking on energy transitions, offering scenarios consistent with limiting warming to 2°C or 1.5°C regarding the speed, trajectory, and feasibility of different fossil fuel reduction pathways. To limit warming to 1.5°C, global coal, oil, and natural gas supply must decline significantly from 2020 to 2050, with higher-gas pathways enabled by carbon capture and storage (CCS) and carbon dioxide removal (CDR).
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Economic activity
The demand for fossil fuels is influenced by the average retail prices of each fuel used in final uses, power generation, and other transformation sectors. These end-use prices are derived from projected international prices of fossil fuels and vary by country. For instance, the international prices for coal, natural gas, and oil reflect the price levels needed to stimulate sufficient investment in supply to meet projected demand. They are one of the fundamental drivers for determining fossil fuel demand and supply projections in all sectors.
Economic growth and development in countries like China, India, Indonesia, Vietnam, and the Philippines are expected to drive fossil fuel demand. China's gas-fired power generation is expected to show strong growth as the country expands its capacity to reduce its dependence on coal-fired power plants. This will lead to a surge in gas demand over the next few years. Similarly, the Middle East and Africa are emerging as major growth regions for natural gas consumption due to higher power generation needs, economic progress, population growth, and increased industrial consumption.
The transport sector is another critical component of economic activity that drives fossil fuel demand. Gasoline is the dominant transportation fuel in the United States, followed by distillate fuels (mainly diesel) and jet fuel. In 2023, petroleum products accounted for about 89% of the total US transportation sector's energy use. Similarly, rising incomes in China will result in an increase in car ownership, pushing up demand for fossil fuels. Despite the growing popularity of electric vehicles, the large cumulative fleet of internal combustion engine cars will maintain the demand for oil in the transport sector. Aviation fuel consumption is also expected to rise, and it remains harder to replace with cleaner sources.
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Frequently asked questions
The demand for fossil fuels is driven by economic activity, population growth, and international prices for coal, natural gas, and oil. Fossil fuels have been the dominant energy source for over 150 years, and while renewable energy sources are growing, they have not yet fully replaced fossil fuels.
The demand for fossil fuels has increased significantly over the past 50 years, with consumption doubling since 1980. However, the types of fossil fuels in demand have shifted. While coal was once the primary source of energy, consumption has been declining in many parts of the world due to the increasing use of natural gas and renewable energy sources. Oil and gas demand continue to grow, particularly in the aviation, marine, and industrial sectors.
The large-scale burning of fossil fuels has severe environmental impacts, contributing to global climate change and local air pollution. Fossil fuels are the largest driver of global climate change, releasing carbon dioxide (CO2) and other greenhouse gases into the atmosphere when burned. This has led to dramatic changes in the Earth's climate and is estimated to cause millions of premature deaths each year due to air pollution.
