Fossil fuel use hits new highs in 2023 despite renewable energy boom

Fossil fuel use rose to new record highs in 2023, led primarily by a post-COVID rebound of coal and oil consumption in China, despite the boom in renewable energy displacing carbon-intensive fuels, the UK-based Energy Institute said June 20.

Global primary energy consumption grew by 2% -with global oil consumption rising by over 2.5 million b/d to 100.2 million b/d in 2023 -- as China accounted for all of the fossil fuel growth. Together with gas and coal, fossil fuels made up 81.5% of the global energy mix, down marginally from 82% in 2022, EI said in its latest annual Statistical Review of World Energy.

The world has witnessed a notable divergence in fossil fuel consumption patterns, the report notes, underscoring the varying stages of energy transition across different regions.

China has emerged as the predominant force driving the increase in global fossil fuel consumption. In 2023, the country's demand for coal and oil surged, outpacing the combined growth of the rest of the world. This rebound, largely attributed to China's post-COVID economic recovery, has raised concerns about the global trajectory toward reducing carbon emissions.

In contrast, Europe and the US have shown promising signs of reducing their reliance on fossil fuels. Both regions, which together represent a significant portion of global GDP, recorded declines in overall energy consumption in 2023. Europe's fossil fuel consumption fell below 70% of its primary energy mix for the first time since the Industrial Revolution, with coal consumption halving over the last decade. The US also reported a decrease, with fossil fuels accounting for just over 80% of its total primary energy consumed.

"In advanced economies we observe signs of demand for fossil fuels peaking, contrasting with economies in the Global South for whom economic development and improvements in quality of life continue to drive fossil growth," Energy Institute CEO Nick Wayth said. "It may be too early to call an absolute peak but regardless of who resides at the White House, the US seems likely to follow the European trend."

Oil demand

Formerly BP's benchmark annual energy publication, the energy major handed the Statistical Review to EI in 2021, 71 years after it was first published. EI partners with KPMG and Kearney to produce the study.

Despite the rise in fossil fuel consumption, fossil energy as a percentage of primary energy dropped 0.4% to 81.5% while renewable's share of total primary energy consumption reached 14.6%, an increase of 0.4% over the previous year. Adding in nuclear, 'clean' energy sources made up 18% of total demand last year, the report concludes.

The EI's report comes amid a growing divergence in long-term demand outlooks by key forecasters due to uncertainty over the ramp-up and affordability of clean energy sources.

The International Energy Agency predicts that global demand for gas, oil and coal will peak by 2030, with road transport no longer a source of oil demand growth by the end of the decade. As a result, the IEA considers no further spending is needed to develop new unabated coal or long-lead-time conventional oil and gas projects.

According to S&P Global Commodity's reference case scenario, global oil and biofuel demand will peak at around 111 million b/d in 2031 while OPEC expects global oil demand to reach 110.2 million b/d in 2028. Analysts at Commodity Insights estimate that global oil demand -- including biofuels -- will remain at around 31% of the global energy mix through 2030, while renewable energy sources will grow 6%-8% per year to make up 13% of total energy demand at the end of the decade, up from 8% in 2022.

China played a pivotal role in the increase of oil demand over 100 million b/d, the EI report concludes, with its refining capacity surpassing that of the US for the first time at 18.5 million b/d, making it the largest oil refining market by capacity.

The ending of China's extended zero-COVID lockdown policy saw demand for gasoline and diesel rebound to 6,253 kb/d, 15% above their 2019 pre-COVID levels. Whilst its demand for jet/kerosene grew by 74% in 2023 to 829kb/d, this is still 14% below the 2019 level which was a record year for China.

However, the throughput of refined products from China still lags the US with an overall utilization of 81.7% versus 86.6%, the report notes. Global gasoline consumption of 25 million b/d was just above its 2019 pre-COVID level, but kerosene (largely used for aviation fuel), although growing strongly (17.5% in 2023), has yet to return to its 2019 peak, according to the report.

EV impact

The transition away from fossil fuels, however, remains gradual. The EI report highlights that while renewables are growing, their impact on overall fuel demand is still limited. For instance, the increase in electric vehicle (EV) sales has yet to make a significant dent in gasoline and diesel demand in both Europe and the US, the report concludes.

While gasoline and diesel have fallen around 1% on the year in both markets, both saw upticks in gasoline demand (1.5% US and 5% Europe).

"As we look towards the future, the transition from fossil fuel-powered vehicles to electric vehicles is expected to gain pace. However, this shift will require a concerted effort from policymakers, industry stakeholders, and consumers to overcome existing barriers and drive meaningful change in the global energy landscape," Wayth said.

Global natural gas saw the weakest growth of all fossil fuels in 2023, increasing by just 1 Bcm or 0.02% on the year and only slightly above the 2019 pre-COVID level. As a result, gas' share of global fossil fuel consumption remained around the 39% mark on the year and its share of total primary energy consumption fell 0.5% since 2019.