Pop quiz: Worldwide, what’s the fastest growing primary fuel on a per capita basis?  It should come as no surprise to hear the answer is coal. Cheap and scalable, the ubiquitous black stuff is the first menu choice of nearly all industrializing economies with a growing energy appetite. That was easy; how about the second fastest growing fuel?


You may be inclined to think the answer is crude oil, but it’s not. Think natural gas, which is on a nice uptrend trend right behind coal. In fact, in most regions of the world except North America there is broad acceptance for greater natural gas use in their energy diet. So, what’s our issue?

 fig 1

Figure 1 shows the per capita consumption trends of each primary fuel that spans 1965 to 2008. First look at oil – though it’s the dominant fuel in our energy diet (the typical earthling consumes an average 4.5 barrels of oil per year), the trend line has been quite stagnant and actually fell in 2008. At first blush, it’s easy to attribute the downtick in personal oil consumption to high prices followed by the credit crisis, but those factors were omnipresent for coal and natural gas too. Much insight can be distilled out of Figure 1, but for now the thing to note is that consumption of coal and natural gas is growing faster than population growth, independent of price and extreme business cycles.

Inspection of regional data shows that one of the few places in the world where natural gas consumption is stagnant is North America. The peoples of Asia, South America, the Middle East, and several European countries are all using more natural gas in their energy diets as a clean-burning, scalable, efficient and abundant fuel. Yes, it’s true that there are concerns about the geopolitics of supply, primarily emanating out of Russia, but the reality is that there is an almost unlimited quantity of inexpensive natural gas globally. LNG trade is increasing every year and on top of that it’s only a matter of time before the global proliferation of shale gas technologies will diversify gas reserves and expand productive capacity to satisfy the world’s needs for many decades if not centuries.

Growth of natural gas in emerging transportation markets is intriguing and should even make oil guys wake up and smell the H2S. For example, the growth rate of natural gas vehicles (NGVs) in Asia is quite remarkable and on an exponential up trend. Last year, the Asian NGV fleet grew to 4.5 million vehicles. That doesn’t sound like much, but consider that it was only 3.0 million in 2007.

Also consider Pakistan where two million NGVs now compose a third of that country’s vehicle fleet. Of course, few are interested in Pakistan, because it’s ONLY 175 million people. Sure, China and India are the big markets to watch, but there too the numbers of NGVs are rising quickly. For example, in China, last year’s growth was 48% with 1.1% of all vehicles now being NGVs. It’s doesn’t sound like much yet, but the growth of NGVs is far faster than petroleum power, and is accelerating.

We hear a lot about how oil demand will soar when hundreds of millions of people trade in their donkeys and bicycles for cars. It’s all very valid concern and even I have done the math to show the looming, unsustainable trend. Nevertheless, don’t assume all these new drivers are going to be pumping gasoline. Increasingly, natural gas nozzles are being used to mobilize the millions of people getting their first driver’s license.

I often get asked if emerging economies like China and India are “leapfrogging” the rigid energy template we have built and cemented in North America. To a degree the answer is “yes”, though the leap is not as sexy as the telecom business where anxious consumers are going straight to cell phones and bypassing the need for anachronistic land lines.

Historically, the evolution of energy use for an emerging economy went like this: first begin by damming up all your rivers for hydroelectric power, then quickly migrate to coal for scale. Then, as your population starts becoming wealthier, use oil to boost your society into the world of mobility and modern amenities. Finally, as the limitations of those compelling fuels are reached, and cleaning up the environment becomes a high priority, branch out into nuclear power, natural gas and renewables.

Today, the data coming out of emerging economies is showing that hydroelectric power and coal are still the big booster fuels for bringing electricity to people and taking them out of poverty. However, natural gas is playing a much bigger role in a society’s energy evolution, much earlier than it used to. It seems that developing societies are figuring out that in ground transportation, natural gas is a viable, scalable substitute for petroleum. In power generation they understand that natural gas is clean, efficient, reliable, scalable, secure and affordable.

Why then are we in North America having such difficulty moving to more natural gas, when it has such compelling utility that others around the world are recognizing? Why, when we’re not impoverished, are we stuck on rehashing old energy paradigms, tantamount to refurbishing typewriters when the world is moving onto word processors? Of course, much of the answer lies in the fact that mature societies don’t like change and entrenched incumbents like coal and oil are very difficult to displace. Fair enough, that’s human nature and business 101; but maybe a larger part of the problem is that most people can’t even answer a simple pop quiz.

Via Calgary Herald