Significant price differences between regional natural gas markets have driven many European countries to increase coal consumption while decreasing use of natural gas (Source: BP).

Coal, natural gas, and oil accounted for 87 percent of global primary energy consumption in 2012 as the growth of worldwide energy use continued to slow due to the economic downturn. The relative weight of these energy sources keeps shifting, although the change was ever so slight. Natural gas increased its share of global primary energy consumption from 23.8 to 23.9 percent during 2012, coal rose from 29.7 to 29.9 percent, and oil fell from 33.4 to 33.1 percent. The International Energy Agency predicts that by 2017 coal will replace oil as the dominant primary energy source worldwide.

The shale revolution in the United States is reshaping global oil and gas markets. The United States produced oil at record levels in 2012 and is expected to overtake Russia as the world’s largest producer of oil and natural gas combined in 2013. Consequently, the country is importing decreasing amounts of these two fossil fuels, while using rising levels of its natural gas for power generation. This has led to price discrepancies between the American and European natural gas markets that in turn have prompted Europeans to increase their use of coal for power generation. Coal consumption, however, was dominated by China, which in 2012 for the first time accounted for more than half of the world’s coal use.

Global natural gas production grew by 1.9 percent in 2012; the United States (with 20.4 percent of the total) and Russia (17.6 percent) are the dominant producers. Other countries accounted for less than 5 percent each of global output.

In 2012, coal remained the fastest-growing fossil fuel globally,even though at 2.5 percent the increase in consumption was weak relative to the 4.4 percent average of the last decade. China increased its coal use by 6.1 percent. India also saw significant increases in its coal consumption—9.9 percent in 2012. Coal use by members of the Organisation for Economic Co-operation and Development (OECD) declined by 4.2 percent, as an 11.9 percent decline in U.S. consumption outweighed increases of 3.4 percent in the EU and 5.4 percent in Japan.

Oil remains the most widely consumed fuel worldwide, but at a growth rate of 0.9 percent it is being outpaced by gas and coal for the third consecutive year. The OECD’s share declined to 50.2 percent of global consumption—the smallest share on record and the sixth decrease in seven years. This reflects declines of 2.3 percent in U.S. consumption and of 4.6 percent in EU consumption. By contrast, usage in China and Japan rose by 5.0 and 6.3 percent respectively.

Conversely, global oil production grew by more than twice as much as consumption—2.2 percent or 100.1 million tons in 2012. This was mainly due to a rise in U.S. output of 13.9 percent—the highest rate ever. In comparison, Canada, China, and the former Soviet Union saw relatively small increases of 6.8, 2.0, and 0.4 percent respectively.

Consumption of all fossil fuels will likely grow in the future. With increasing shale gas fracking and many countries’ interest in displacing coal generation with natural gas due to the lower greenhouse gas emissions, natural gas use seems well poised to grow. Although some countries are trying to move away from coal use, the incredible coal consumption growth rates in China and India will likely make this the main energy resource in the next few years. Last, even if oil is eventually not the world’s dominant energy resource, its use is expected to grow unless there is a fundamental change in the way the world fuels the transportation sector.

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