Hit hard by Covid-19, world energy consumption declined by 4.5 percent. The dip was almost double what the experts predicted.
But there is more to the story.
World Energy Consumption
In 2020, we had the biggest plunge in energy demand since WW II:
In China though demand was not down. Since 2008, China has been one of the world’s top energy consuming countries:
Comparing 2020 (above) and 2019 (below), you can see that world energy consumption fell in nine of the top ten energy consuming countries, from the U.S. to Iran:
Until China moved to the top slot in 2008, the U.S. was the world’s biggest energy consumer:
The wind and solar capacity that continued growing during the pandemic was driven by China:
Correspondingly, emissions dropped substantially. But, we would have needed to sustain the 2020 decrease for 30 years to achieve the Paris climate goals:
Our Bottom Line: Supply and Demand
Trying to understand the impact of the pandemic on our energy consumption, we can look at oil’s supply and demand. On the demand side, almost like Goldilocks, we have a massive decline, then a big increase, and finally, wind up in the middle. Meanwhile with OPEC (Organization of Petroleum Exporting Countries) influencing the supply side, at first they were unable to agree on restrictions. Soon however, they cut production, depleted excess supply, and returned to some normalcy.
Below, you can see the three phases:
Where are we? Perhaps as economists, we can just say that when Covid-19 vastly shifted incentives, it transformed supply and demand.