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She Jianyue: “The Logic of Oil Prices” -- Global Petroleum Geographic Zoning

Summary of this issue

· Global energy consumption structure

· Global energy geo-distribution

What's in this issue

Next, let's talk about the pattern, but let's first look at it from a macroscopic perspective of energy. Regarding the energy landscape, I think the BP (British Petroleum) Energy Statistics Yearbook should be the most comprehensive data report we can get for free. First, let's take a look at the structure of global primary energy consumption. From the chart, we can see that the total amount is rising, which also reflects that the global economy continues to grow at the same time. Oil, gas, and coal are so-called primary fossil energy sources, also called non-renewable energy. Together, these three energy sources account for 85% of total energy consumption at one time. The total ratio structure has actually not changed much. The figure shows data from 1992. In fact, over the years, our consumption of fossil energy has always increased, and there have been no new energy sources or revolutionary energy breakthroughs. Moreover, we can see that the green area representing oil has always been relatively calm. The red area represents natural gas, and the gray area represents coal. The pattern of oil, gas, and coal is roughly three parts of the world.

She Jianyue: “The Logic of Oil Prices” -- Global Petroleum Geographic Zoning -1

From a primary energy perspective, what's one lesson for us? We see that new energy is growing rapidly, but I personally feel that the current growth of new energy sources may not even cover the increase in total global energy demand, so I think consumer demand for oil, gas, and coal will probably continue to grow for some time to come. Which one is going to grow faster? Let's take a look at the changes in the consumption ratio of the three varieties. We can see that the share of oil consumption has actually declined since 1992. In the case of coal, we can see that it basically remains at a level without too much fluctuation. However, in the last two or three years, we can see a clear decline in the proportion of coal consumption. This decline actually comes from China, because China has been trying to reduce coal consumption in recent years while increasing consumption of natural gas and new energy sources. Seen from this perspective, China's coal consumption control still has a certain effect.

Natural gas is supposed to be an emerging fossil energy, but in fact, it shouldn't be called an emerging energy either; anyway, its overall trend is to keep moving upward. Also, from a supply perspective, I think the total consumption of natural gas will increase further. We'll talk about it later. In fact, oil is buried relatively shallower, and natural gas is buried deeper. Humans must first dig up energy from the shallow layers and then find the deeper layers. The changes in the share structure of oil, natural gas, and coal over the years actually reflect the human pursuit of low-carbon environmental protection. The pursuit of low carbon is actually quite a helpless process; it is a kind of game we are playing with nature's resources.

She Jianyue: “The Logic of Oil Prices” -- Global Petroleum Geographic Zoning -2

Of course, we also see a line at the bottom of the chart. The growth rate has been very rapid over the past few years. This is obviously the new energy we are talking about. Because it has a small base, it shows a rapid growth rate. Actually, for us, do we need this stuff or not? It's clearly needed. It may also include a lot of opportunities; I don't want to expand too many, but I'd like to talk about the issue of electric vehicles. Electricity is actually a secondary energy source, not a primary energy source. Everyone says it's fine for us to drive electric cars, but where does the electricity come from? Some people say that solar power can be generated, wind power can be generated. Let's not forget that every drop of oil has been accumulated over 100,000 or hundreds of thousands of years, so an oil field is probably accumulated over tens of millions of years, and how many drops of oil do we get in the sun in a year? In fact, the energy flow density is insufficient. Our fossil energy actually has a very high energy flow density per unit mass. We can get renewable resources, but there's one problem: we need to cover the Earth's surface with solar panels. Is that possible? It's impossible. Therefore, I think human history is facing another major hurdle, that is, our energy really needs another revolution. I personally think thermonuclear technology, or controlled nuclear fusion, may be needed to promote it, but we can see that this technology has not yet achieved a commercial breakthrough.

When it comes to the pattern, you have to talk about it by region. I've been reading reports on the crude oil market since 1997. The first report I read was in English. It divided the global crude oil market east of Suez and west of Suez, so don't ask me why it was divided this way (I accepted this division at the time, but I didn't understand in my heart why my ancestors were divided this way). But if you think about it seriously, it also makes sense, why? Because the Suez Canal is a transportation hub, its navigation capacity is limited, and once this place is at risk, it will block the economic trade of oil between East and West. For example, Europe and America need oil from the Middle East. Europe's closest route is to transport it through the Suez Canal. If interrupted, it will have to go south from the Indian Ocean, detour the Cape of Good Hope in South Africa, and then go north along the Atlantic Ocean. I've been divided this way since I first started, and it can also be said that geographic nodes are very important. In any case, this is a division, that is, we know that the global energy market is divided into one level, or the largest division, that is the Suez East and West markets.

Further, according to the BP report, the global energy market is divided into six regions. We can see that the energy consumption structure of each region is very different. You can first take a look at the Asia-Pacific region on the far right. We can see that the proportion of coal consumption is very high, so I said this place is a “coal-based” energy region. If you look at the Middle East region, you can see it as soon as you look at the Middle East region. Even if there is no Chinese label, you can see it. Because we also call oil and gas hydrocarbons, this place belongs to the “hydrocarbon-based” energy structure. I think the structure of the region on the left is more balanced, and the energy structure is also more diversified. This place is America today.

She Jianyue: “The Logic of Oil Prices” -- Global Petroleum Geographic Zoning -3

Is the structure of energy consumption in different regions determined by demand or supply? I think it's still a supply decision, or this is a matter of resource endowments. Every region must first find its local superior energy for consumption. China actually has a lot of coal, so how can we solve our energy security problem? It is definitely still necessary to consider how to make good use of coal, and second, how to diversify energy sources. Therefore, in China, my personal objection is to unilaterally discuss a sub-topic, such as oil safety.

There is no solution to discussing oil safety issues in China, because our resources determine that we don't have much oil, so what can we do if we don't rely on imports? But is excessive reliance on imports causing our energy security problems? Not necessarily. So my personal opinion is that from the perspective of energy security, we should make better use and reserves of coal, increase our reserves of petroleum, and guarantee our energy security by reserving scarce resources and making rational use of our own superior resources. When it comes to oil safety, it is absolutely impossible for us to do the same as the US. As we will talk about later, Western countries use a method of force to protect their oil security. This is one of my thoughts on the structure of energy consumption by region.

That is the content of this course, thank you all.

This issue's guests:

She Jianyue: “The Logic of Oil Prices” -- Global Petroleum Geographic Zoning -4

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