IEEJ：November 2016ｃ○ IEEJ 2016

Special Bulletin
A Japanese Perspective on the International Energy Landscape (298)November 18, 2016

Implications from Talks in U.S. and Europe for Future Global Energy LandscapeKen Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn November 15, a seminar titled “A Japanese View on World Energy Future: The “3E”
Challenges under the Emerging Energy Landscape” took place in London, cosponsored by theJETRO (Japan External Trade Organization) London Office, the Japan Society and the JOGMEC(Japan Oil, Gas and Metals National Corporation) London Office. In line with the title, I made apresentation on key points of the IEEJ Asia/World Energy Outlook 2016 and Japanese energy policy
challenges (for an overview of the outlook, please refer to “A Japanese Perspective on theInternational Energy Landscape (294)”).
Following my presentation were comments by Prof. Paul Stevens, distinguished fellow atChatham House (and at the IEEJ as well), and Mr. Peter Hughes who leads Peter Hughes Energy
Advisory Ltd., and an audience question-and-answer session. Some 80 people participated in theseminar (on a registration basis), leading to a vigorous question-and-answer session. Before and after
the seminar, I also had opportunities to exchange views with energy experts in London andWashington DC. From these talks, I learned some very interesting implications for key points fordeveloping a future world energy outlook, as summarized below:
I explained four key points of the IEEJ outlook -- (1) ASEAN (Association of Southeast
Asian Nations) market challenges amid the energy market gravity center’s shift to Asia, (2)analyzing an energy supply disruption scenario from the viewpoint of “prepare for adversity inprosperity,” (3) significance of climate change measure implementation and enhancement frompragmatic viewpoints, and (4) nuclear energy’s contributions to the so-called Three E’s (energysecurity, environmental protection and economic efficiency) in the world, particularly in Asia. All
these key points attracted high interests. Particularly, the second to fourth points include some
controversial issues as there are various opinions or stances on these points. However, controversial
discussions based on sound analyses represent a mission for a think tank. In this sense, this outlook
was significant, some participants in the seminar noted.
As a matter of course, controversial discussions alone are insufficient. More important are
logical and objective analyses from appropriate viewpoints that define issues. The abovementioned
IEEJ outlook has still some preliminary analysis and will have to be deepened in line with changes
or developments in the future world energy situation.
The first of interesting implications from the latest series of discussions is how we shouldlook at future oil demand growth potential. The IEEJ outlook, as well as other representative
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outlooks including those by the International Energy Agency, predicts that global oil demand willcontinue to expand over a long term, though with growth slowing. In the talks, however, it waspointed out that oil demand may peak out earlier than expected.
A consensus prediction is that global oil demand will still continue to expand mainly indeveloping countries as indicated by growing automobile ownership in developing countries and alow per capita oil consumption level (or room for further expansion). Given the abolishment of oil
subsidies or oil tax hikes in developing countries, the spread of non-oil-fueled vehicles and fuelefficiency improvement amid rapid diffusion of advanced technologies, changes in young people’s
attitudes towards vehicles and driving, and other factors, however, some people are expecting that oil
demand may peak out at an early date as oil demand expansion comes to an end.
It is not easy to accurately forecast a future trend of oil demand. Given that oil is theworld’s largest energy source with oil prices exerting various influences on the world economy andmarkets for other energy sources, however, the peaking-out of oil demand is a very significant
problem. As the peaking-out is likely to seriously affect the international oil industry as well as oil
producing countries’ economies and development, future oil demand must be studied and analyzed
further.
In this sense, it was pointed out that there are great uncertainties about future coal andnatural gas demand. As for coal, some people expect that demand will expand on the strength of thecurrent price competiveness, while others forecast that demand will slow and decline due to theenhancement of environmental protection measures. The contradictory predictions have made itdifficult to predict future coal demand. Natural gas is expected to expand on the strength of abundantresources and cleanness. In reality, however, natural gas demand growth has slowed on competition
from coal, renewable energy and nuclear energy, making it difficult to predict future natural gas
demand. Due to these trends, some people start to argue that overall fossil fuel demand may peak out
at an early future than expected.
On the other hand, a key challenge for a long-term energy outlook is how to position thefuture of renewable energy at a time when renewable energy power generation costs havesurprisingly declined in some cases in the world. As a matter of course, however, we must consider
total renewable energy power generation costs including those for responding to the intermittency ofrenewable energy supply. This is also an important analytical viewpoint. As for nuclear energy that
could make great contributions to the “3 Es”, a challenge is how to incorporate nuclear energy’sposition in the competitive power market and uncertainties about safety concerns and social
acceptability into a long-term outlook.
Regarding future uncertainties, the latest development of Donald Trump’s victory in theU.S. presidential election has become one of the most important issues for analyzing energy andenvironment problems, as reiterated in the series of talks. U.S. President-elect Trump’s negative
stance on the Paris Agreement and its influences, his greenhouse gas emission reduction policy,
domestic oil and gas development and exports under his “America First” doctrine,” his coal,renewable energy and nuclear policies, and his policies on the Middle East, Asia and Russia will
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exert great impacts on the global energy market. The incoming U.S. administration’s policies arevery uncertain and unpredictable at this moment, making it more difficult to forecast the future
global energy market.
How will we have to analyze the various uncertainties given above and incorporate theminto an outlook? The question may represent a key unavoidable challenge facing the IEEJ and otherorganizations trying to predict the future world energy market.

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