In 1992, novelist P.D. James published “The Children of Men.” It is a brutal novel, set in 2021, about a world without births, where mankind is on the brink of extinction, the British government is unrecognizable, and hope for the future of an aging population has crumbled into a decaying spiral of suicides, crime and exploitation.
Well, it’s now 2021 and our world is still creating children, but according to a July 2020 BBC article, at a lower rate. And this trend may well present us with new realities, including when it comes to the energy industry.
How populations are projected to change by 2100
China and Japan, currently high demand oil and gas consumers, could see their populations drop by roughly 50%.
India could fare a bit better but may still see a population drop of nearly 25%, while Russia is projected to see its population drop between 15-50% by 2100.
Other high hydrocarbon demand regions of the world have different outlooks.
U.S. population growth is projected to increase from 331 million in 2020 to 404 million in 2060, but flatten out from then to 2100.
According to data from the European Commission, the European Union is projected to lose population by 2100.
However, according to the U.S. Census Bureau, Africa will offset this trend, with Nigeria projected to have the second highest population in the world by 2100.
Overall, the world population is projected to gain about 3.1 billion people by 2100, according to the Pew Research Center, almost all of which will be in Africa.
Elderly population on the rise in Europe
Aging trends will probably dampen demand for transportation fuels.
The world’s number of 80-year-olds is expected to rise from 141 million currently to 866 million by 2100, according to the BBC.
In the U.S., the numbers of Americans aged 65 or older will swell from 56.4 million to 98.2 in 2060, an increase of nearly 75%. Since miles driven per year drops dramatically from the 55-64 age bracket (11,972 miles per year) to 7,646 for the 65 and over age bracket. This translates into a demand drop for gasoline of about 5%, when looking at 2019 usage statistics and assuming an average of 20 miles per gallon, per driver.
Aging will affect GDP as societies grapple with how to care for an aging population, adjust to lowered consumer spending and reductions in tax base as populations age out of the workforce, and replenish dwindling labor supplies.
As populations age, it’s probable that families will become geographically more compact in order to provide care for their elders. It is an open question as to whether this translates into a higher demand for fuel (running errands for elders), more electric vehicle ownership to offset fuel costs or has zero impact on consumption patterns.
Aging trends vs. oil and natural gas demand?
So, what might these population growth slowdowns and aging trends mean for oil and natural gas demand?
If demand follows population growth, then we should focus on Africa given its expected population growth trends.
We have always assumed that the economic growth in less developed parts of the world will follow the path taken by first world nations — industrialization, large distributed power grids, large distributed communication infrastructures based on a foundation of thousands of miles of cabling and copper, and massive buildouts of highways to get goods to and from markets.
But will this be the path taken by Africa?
No doubt that factories will be built to shorten supply chains for goods, whether they be next-gen electric vehicles or cement.
Large power grids provide the power that secures better lifestyle options for those with access to them. But they require massive capital outlays for construction and maintenance.
Mini grids — the future of energy in Africa
A model of power access that is gaining traction in Africa relies on mini grids that are driven by localized solar delivering power to battery packs.
Ghana Energy Development and Access Project (GEDAP) has targeted 11 different locations for these kinds of nodal community power projects, with financing underwritten by the World Bank.
A pilot project created five mini grids and provided 24/7 dependable power sourced from solar PV cells for about 10,000 people living on islands in and around the Volta River.
Noor, located in Morocco, is the world’s largest concentrated solar power array, generating 580 megawatts. It will be augmented by the 800-megawattMidelt project slated to be built 300 miles away in the Atlas.
The shift in African power consumption to renewables
Compared to Texas’ energy generation — about 35,000 megawatts per hour — the total power output of these two complexes is modest, but in combination with the GEDAP project, it shows that renewables are gaining in importance across Africa.
The IMF can see a meaningful shift in African power consumption to renewables by 2050, according to a March 2020 Finance & Development article, with most power being generated by solar and wind by 2100.
Part of the “new way” to African modernization can also be seen in the rapid adoption of mobile and smartphone adoption. A February 2020 AppsAfrica.com article highlights how the number of individuals in Sub-Saharan Africa using mobile devices will increase through 2025.
No telephone poles, no thousands of miles of copper wiring and, for an appreciable number of folks with smartphones, online banking and funds transfer options. No need to drive to the bank.
Africa may be on the cutting edge of developing nodal communities that are organized around densely concentrated resources that efficiently provide consumers an increasing array of lifestyle options.
Will this play a major role in the future worldwide demand for hydrocarbons?
Probably not in the next 10 years, which is the time frame around which most medium and smaller U.S. independents craft their business models.
But for companies with business models that contemplate more than 20 years of operations, the combination of worldwide drops in birth rate, aging populations, adoption of renewables, and new thinking — like the African model — may well amplify the story of demand destruction beyond simplistic assumptions about electric vehicle adoptions.
Recent shareholder revolts against ExxonMobil and the Dutch government’s guidance to Royal Dutch Shell show that both private markets and governments are moving to reduce carbon in ways that put additional downward pressure on demand.
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