The International Monetary Fund said it expects the European economy will remain in recession for 2013 and expand by less than 1 percent next year. That translates to lower demand for oil and natural gas. On strategic issues, EU leaders last week said they were concerned about the ability to defend the bloc's national interests in the age of austerity. With demand centers for energy resources shifting to Asian economies, and production gains continuing in North America, the European Union may find itself in desperate need of a revolution on many fronts if it wants to stay relevant in the international community.
The International Energy Agency said it expects European energy demand to decline by 1.7 percent for the year to 13.5 million barrels per day, following a 3.9 percent decline for 2012. European demand declined during the first half of the year as Germany's economic gains failed to spill over to its neighbors. Globally, demand for energy is expected to increase by 1.2 million bpd next year, suggesting the eurozone will continue to lose ground against other major economies.
A report published last week by the Energy Information Administration, the analytical arm of the U.S. Energy Department, said it expects world energy consumption to increase by 56 percent during the next three decades. EIA Administrator Adam Sieminski said "rising prosperity in China and India" is a major factor for the expected demand increase through 2040. Natural gas consumption in the EU, meanwhile, declined last year by 3.6 percent because of its lackluster economy.
Europe scored a June victory when a BP-led consortium working offshore Azerbaijan made a natural gas pipeline decision that will eventually break Russia's grip on the region's energy sector. That means a continued reliance on foreign markets, however, as the EIA cut its reserve estimate for European countries rich in shale natural gas. Member state Great Britain is on the cusp of launching its own revolution in terms of shale oil and gas, though that could be for naught as British Prime Minister David Cameron continues to mull his nation's association with the EU. French President Francois Hollande, meanwhile, said there "will be no shale gas exploration" during his tenure, which ends in 2017. Even the mighty Statoil, Norway's powerhouse, posted a decline in profits.
European leaders last week expressed concern about the ability to sustain its defense capabilities in the age of austerity. President of the European Commission Jose Manuel Barosso said the key to a collective defense was cooperation during "times of scarce resources." The IMF last week said economic growth in the EU "remains elusive" and industrial production remains in decline. The EIA's Sieminski said the shift to Asian economies will have a profound impact on development in world energy markets. With few options to generate new capital, or in the French case, a refusal to even pursue it, the EU will not have much weight in a changing energy world.
By. Daniel J Graeber of Oilprice.com
