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The global energy market is presently undergoing an epochal transformation. There are three key phenomena taking place:

  • A major realignment in importance between the three main traditional fossil fuel sources: oil, gas and coal.
  • A shift in consumption from developed mature markets with slow growing or even negative population growth to China, India and other developing countries.
  • Booming growth in renewable energy production.
  • The US heading towards energy independence.

Oil demand in much of the developed world is now declining or on the verge of declining. This is quite a major development, considering that oil accounts for the single largest share of global energy demand and has precipitated many global armed conflicts during the past century.

Among the reasons behind declining oil consumption include:

  • A shift to environmentally friendlier natural gas (aided by major increases in US output of shale gas due to improved extraction technology).
  • Stellar growth in renewable energy production resulting in some substitution of fossil fuels.
  • Higher efficiency hybrid and electric cars reducing oil consumption in the motor vehicle market.

Cost per megawatt-hour for renewable energy sources such as wind and solar continues to decline, resulting in much faster growth prospects relative to non-renewable energy sources. In many countries, wind and solar combined now account for over twenty percent of total energy demand, something that would have been unthinkable just several decades ago. Other traditional renewable energy sources such as hydropower and geothermal energy are also seeing continued growth, although not at the pace being set by the wind and solar sectors. Demand for coal is also declining in many countries, primarily due to replacement in the power generation sector with environmentally friendlier natural gas.

In the coming decades, global energy consumption will continue to rise far more rapidly in China, India and other developing countries in comparison to the developed world, shifting global consumption patterns drastically. Both China and India have limited domestic sources of energy, and these two countries together account for around 35 percent of the world’s population. Consequently, both countries will see a surge in energy imports.