IEEJ： January ©IEEJ 2024
Special Bulletin
A Japanese Perspective on the International Energy Landscape (670)January 2, 2024

2024 Global and Japanese Energy Outlook
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, Japan
Since 2020, the international energy situation has undergone turbulence, including theenormous impact of the COVID-19 pandemic, the acceleration of the trend towards carbon neutrality,
the simultaneous surge in energy prices, the destabilization of the international energy market throughthe Ukraine crisis, the deepening division of the world, the outbreak of the Gaza crisis, and thedestabilization of the Middle Eastern situation. How will the new year 2024 be? In the following, Iwould like to share my views on the outlook for the global and Japanese energy situations in 2024
while referring to 13 energy market forecasts for 2024 published by the Institute of Energy Economics,
Japan, on December 21 and 22 last year.
In 2024, fuel prices in the international energy market are likely to generally remain flat ordecrease slightly. As for crude oil prices, the average annual price of Brent is expected to be around$85 per barrel against $82/bbl in 2023, fluctuating between $75/bbl and $95/bbl. A global economic
slowdown, the stagnating Chinese economy, and an increase in U.S. crude oil production will exert
downward pressure on crude oil prices, while the OPEC-plus group of oil-producing countries
continues to make supply and demand adjustments to support prices. Spot liquefied natural gas prices
in Asia will show a slight decline in 2024 to around $14 per million British thermal units from around$16/MMBtu in the previous year. The expansion of LNG supply capacity mainly in the United States
is expected to help satisfy the steadily-increasing demand. The FOB export price of Australia's steamcoal will decline from around $170 per ton in 2023 to around $130 in 2024. Import demand will remainrobust in China and India while slowing down in developed countries. Supply expansion in Australia,Indonesia, and other countries will continue to help satisfy demand.
However, there are various uncertainties about future international markets, indicating thatenergy markets and prices may fluctuate significantly. In the crude oil market, global economic risks
such as the deterioration of the Chinese economy and some disarray in the OPEC-plus group mayexert strong downward pressure on prices, while there are price-boosting factors such as geopoliticalrisks in the Middle East. LNG prices could surge steeply depending on a demand increase amid cold
waves and accidents involving LNG supply projects, while surplus supply capacity remains small. If
this winter is warmer than normal with gas inventories in Europe remaining high towards spring,
however, prices may plummet. Regarding coal, attention should be paid to the Chinese economic
situation and such potential occasions as sluggish coal supply from Australia and Indonesia.
Among effects on overall energy price trends, the impacts of major geopolitical risks in 2024
are an important point that should not be overlooked. As the Gaza crisis continues, the human death
toll and humanitarian crisis are worsening in a manner to destabilize the situation in the Middle East.
So far, the Gaza crisis has had no direct or large-scale impact on oil supply from the Middle East,
although Houthi attacks have forced in some cases shipping companies to reroute oil tankers from theRed Sea. However, no optimism can be warranted regarding future developments and their effects. As1

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the Ukraine war drags on, the outcome of the war itself and the fate of Western sanctions against
Russia could have a significant influence on the energy situation. In East Asia, the economic slowdown
in China, the world's largest energy consumer and importer, is a major destabilizing factor.
Developments regarding the Taiwan issue are also a matter of concern. Geopolitical risks in East Asia
in 2024, including the North Korea issue, cannot be underestimated.
A factor that could have significant impacts on the international situation and geopoliticalissues is the outcome of the U.S. presidential election in November. The direction of domestic andforeign policies in the superpower United States will depend on whether the Democratic
administration will remain in place or be replaced by a Republican administration and who will
become president. The situations in the Middle East, Ukraine, Russia, and East Asia could all begreatly affected by the outcome of the U.S. presidential election. The outcome could also exertcomplex and great impacts on the international energy situation. The U.S. presidential election may
become the most important factor that could influence the world in 2024.
The outcome of the U.S. presidential election could also have a significant impact on global
climate change policy in 2024. At the 28th Conference of the Parties to the United Nations Framework
Convention on Climate Change, it was confirmed that reducing global greenhouse gas emissions by60% from 2019 in 2035 will be important for achieving the goal of limiting global warming to 1.5°C.
To achieve the goal, COP28 agreed to triple renewable energy power generation capacity and double
the energy efficiency improvement rate by 2030 and called for the promotion of the transition awayfrom fossil fuels. Depending on the outcome of the U.S. presidential election, however, U.S. climatechange policy could change significantly. Its impact could have non-negligible effects on global policy
initiatives. As well as the U.S. presidential election, European Parliament elections scheduled for Juneshould not be missed. The extent to which conservatives will increase their presence in the European
Parliament after their recent growth could have a variety of effects on European climate change policy.
These political developments in 2024 are extremely important not only for the United States andEurope but also for the entire world and must be watched closely.
Under these global circumstances, Japan's GDP will post a moderate real growth rate of
1.0% in FY2024. Its domestic primary energy supply in the year will decrease by 0.6% due to progressin energy efficiency improvement. As the restart of some nuclear power plants and an increase in solar
photovoltaics capacity are coupled with a rise in coal-fired power generation capacity, Japan’s LNG
imports will decline below 60 million tons in FY2024. Sales of petroleum products will decrease forthe third consecutive year, slipping below 60% of the peak demand in 1999. As a result, Japan's energyrelated CO2 emissions in FY2024 will decrease for the third consecutive year to 910 million tons.
However, this decline is slower than the pace required to achieve the 2030 target, meaning that Japan
will have to further accelerate CO2 emission cuts to achieve the target.
In 2024, Japan is expected to begin discussions on the formulation of the next Strategic
Energy Plan. The current Sixth Strategic Energy Plan, approved by the cabinet in October 2021, aims
to achieve a target energy mix for 2030 to reduce GHG emissions by 46% from FY2013 and reachcarbon neutrality by 2050. The Strategic Energy Plan aims to simultaneously achieve the so-called
S+3Es -- safety, energy security, environmental conservation and economic efficiency – but the timingof the cabinet approval on the current plan and the discussions at an advisory panel that preceded theapproval indicate that climate change countermeasures were the most important issue for the debateof the current plan.
With regard to the next plan, however, the government will have to have comprehensive and2

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strategic policy discussions that respond to the new situation, including the emergence of energy
security as a top priority under the Ukraine war and its impact, which came after discussion on thecurrent plan. The new situation also features an emphasis on economic security amid the deepening
division of the world. Of course, Japan will have to enhance climate change countermeasures for thenext Strategic Energy Plan in consideration of the outcome of COP28 and the global situation. In orderto achieve the S+3Es in the new situation, the government will have to devise and take measures tocontrol and minimize the energy cost increase required for the S+3Es. Although Japan is required toutilize all available options such as energy efficiency improvement, renewable energy, and innovations,the current Japanese situation indicates that the utilization of existing nuclear power plants throughthe restart of existing plants and the extension of nuclear reactors’ service life, based on safety
requirements and public understanding, will be effective for reducing CO2 emissions, improving
energy self-sufficiency, and minimizing electricity costs run-ups. It will be important for thegovernment to have robust discussions on nuclear energy policy including the position of nuclear
power in 2050.
Also important for discussions on the next Strategic Energy Plan will be how to materialize
the promotion of innovations that play an important role in proceeding with the energy transition,including hydrogen and ammonia, e-fuels and e-methane, CCUS (Carbon Capture Utilization andStorage), and negative emission technologies. In this regard, it will be important for the government
to integrate the next plan with its industrial policy and growth strategy for Japan's future prosperity
and survival towards 2050. It will also be important to take a strategic approach to envision a desirable
future while recognizing and preparing for a potential discrepancy between the desirable future andreality. In addition, the preparation and deployment of a flexible, responsive international strategy forthe highly important global situation, including the abovementioned U.S. presidential election, will
also be important for the formulation of the next plan.
Contact: report@tky.ieej.or.jp
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