Figure 1 shows annual percentage contributions to total global energy consumption by fuel type since 1965. I plotted it up to see if it contained any hidden messages about the world energy market that had escaped my attention (the data used to construct all the graphs presented in this post are from the BP 2014 Statistical Review):
Figure 1: Percent contribution to global energy consumption by fuel type
At first glance there was nothing new. Oil‘s contribution peaked in 1973 and has been trending down ever since. Coal’s contribution declined rapidly between 1965 and 1977, but then it flattened out and after 2002 began to stage a comeback. Gas slowly built market share before 2002 but has stabilized since then. Hydro’s contribution has hardly changed, nuclear forged ahead until 1985 but then flattened out before beginning to fall away, and other renewables (wind, solar etc.) have barely lifted off the zero line.
Then I noticed an interesting feature. The percentage contributions of oil and coal tend to move in opposite directions. Coal goes down, oil goes up. Oil goes down, coal goes up. Oil goes flat, so does coal. But neither oil nor coal show a clear overall relationship with the third major source of energy, natural gas. The suggestion is that oil and coal have been substituting for each other, with coal replacing oil or oil replacing coal depending presumably on market conditions at the time, but with gas remaining largely unaffected.
Let’s look at this a little more closely.
A very simple test for an oil-coal relationship is to add the two together. If one is periodically substituting for the other then the sum of the two should give us something approaching a smooth line. And it does, more or less.
Figure 2: Sum of contributions from oil and coal
Another approach is to compare the first vertical derivatives of the percentage contributions of coal and oil to the global energy mix, which although it sounds complicated is actually just a matter of calculating how much the oil and coal percentages changed in each year and plotting them up. Figure 3 shows the results:
Figure 3: Annual change in percent contribution, oil versus coal
Now we will turn coal upside down so it moves in the same sense as oil and add an XY scatterplot. The match isn’t perfect, but the annual percent changes are obviously related and the level of correlation is quite high (R=-0.84):
Figure 4: Annual change in percent contribution, oil versus coal (inverted)
Annual changes in the percentage contributions of gas and oil to the global energy mix, however, show no relationship whether the plot is turned upside down or not (R=0.00):
Figure 5: Annual change in percent contribution, oil versus gas
But there is a weak inverse correlation (R=-0.49) between gas and coal (note that coal is inverted again):
Figure 6: Annual change in percent contribution, gas versus coal (inverted)
And we get a particularly close match when we compare coal with the sum of oil and gas (R=-0.94, R squared = 0.88, coal inverted once more). The fact that the trend line has a gradient close to 1:1 further indicates that one MTOE of coal effectively offsets a million tonnes of oil, and vice versa:
Figure 7: Annual change in percent contribution, oil + gas versus coal (inverted)
What are the implications of these results?
Basically what they are showing us is a high level of flexibility in filling growing global energy demand, with wholesale substitution of oil for coal, or of coal for oil, as market conditions change. (The substitution has occurred dominantly in electricity generation; coal can’t substitute for oil in transportation unless we return to steam trains and coal fired steamships). Global energy consumption grew in all but four of the years since 1965 (1980, 1981, 1982 and 2009), and coal and oil have been used more or less interchangeably to fill increased energy demand, or at least that portion of it that wasn’t filled by something else, for the last 49 years. As illustrated in Figure 8 oil dominated before 1979, coal took over from 1979 to 1983, honors were roughly even between 1983 and 1988, oil regained the lead between 1988 and 2002, and since 2002, largely thanks to China, coal has prevailed:
Figure 8: “New” energy contributed by year, oil versus coal
The swings between coal and oil are also large. Between 1965 and 1979 oil contributed over 1,500 MTOE of “new” energy to the world and coal only about a quarter of that. Between 1979 and 1989 coal added about 400 MTOE and oil effectively none. Between 1989 and 2002 oil added about 600 MTOE, roughly six times as much as coal, and since 2002 coal has added some 1400 MTOE, roughly three times as much as oil.
As to what motivated the swings from oil to coal and back again, it was clearly oil price, at least before 2000 (Figure 9). When oil was cheap, new energy came dominantly from oil. When it wasn’t it came dominantly from coal. The situation after 2000 is complicated by the rapid expansion of coal-fired generation in China, but the trend is in the same sense.
Figure 9: Increase in coal & oil “new energy” by year versus oil price
Yet despite the large swings between coal and oil over the last 49 years the global economy has continued to grow and no one has run out of energy, suggesting a) that the world is largely indifferent to what form it gets its energy in as long as it gets it and b) that growth is not as sensitive to continuity of oil supply as is sometimes supposed. There are, however, reasons to believe that these conditions may no longer apply, because large-scale coal/oil substitution requires large amounts of oil-fired generating capacity and there is now very little left (oil now generates less than 5% of the world’s electricity compared to 25% in 1973). So as Euan Mearns observed in an editorial comment, “the next oil shock may be a biggie.”
The final question is why oil and coal consumption should be so closely related while gas consumption isn’t. Most probably this is a result of ease of transportation. Oil or coal can readily be shipped almost anywhere in large quantities and can easily be redirected somewhere else when market conditions change. Gas can’t, or at least not at the moment.