Lower demand for coal will make natural gas an increasingly important fuel

The International Energy Agency (IEA) released its annual World Energy Outlook Wednesday, saying natural gas will play an increasingly important role in the mix of global fuels through to 2040. Renewables will also play a leading role moving forward, but to what extent will depend on how countries implement the Paris Climate Agreement, which President-Elect Donald Trump has threatened to pull out of following his inauguration.

Regardless of the uncertainty around renewable energy and the Paris Agreement, natural gas will likely see major gains, said IEA Executive Director Fatih Birol. “Given the economics natural gas can provide for the energy system, whatever policy we have, natural gas always comes out one of the big winners,” Birol said.

“We see clear winners for the next 25 years – natural gas but especially wind and solar – replacing the champion of the previous 25 years, coal,” Birol wrote in the World Energy Outlook synopsis. “But there is no single story about the future of global energy: in practice, government policies will determine where we go from here.”

In the longer-term, investment in oil and gas remain essential to meet demand and replace declining production, the IEA said in its report, but the growth in renewables and energy efficiency lessens the call on oil and gas imports in many countries.

Global oil demand continues to grow until 2040, mostly because of the lack of easy alternatives to oil in road freight, aviation and petrochemicals, according to WEO-2016. However, oil demand from passenger cars declines even as the number of vehicles doubles in the next quarter century, thanks mainly to improvements in efficiency, but also biofuels and rising ownership of electric cars.

Coal consumption barely grows in the next 25 years, as demand in China starts to fall back thanks to efforts to fight air pollution and diversify the fuel mix. The gas market is also changing, with the share of LNG overtaking pipelines and growing to more than half of the global long-distance gas trade, up from a quarter in 2000.  In an already well-supplied market, new LNG from Australia, the United States and elsewhere triggers a shift to more competitive markets and changes in contractual terms and pricing.


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