Short-term term Energy Supply/Demand Outlook

Transcription

1 The 393rd Forum on Research Works Short-term term Energy Supply/Demand Outlook Forecast through FY26 and Analysis on the Effects of Oil Prices, Economic Growth, and Temperatures December 16 (Tokyo) & 2 (Osaka), 25 The Institute of Energy Economics, Japan Shigeru Suehiro, Senior Economist Energy Data and Modelling Center 1

2 Presentation Topics Outline of the Study Objectives, analytical procedures, model flow Current Status of Energy Demand Current Macroeconomic Status and Outlook Energy Supply/Demand Outlook Sensitivity Analysis Effects of crude prices, economic growth, temperatures Summary 2

3 Outline of the Study Study Objectives: To forecast energy supply/demand through FY26 based on current economic environment and oil price trends, and also to evaluate the effects of uncertain factors in addition to a base case forecast. Forecasting Method: Econometric models (macroeconomics, energy S/D balance) see next slide Case Settings: Base Case Sensitivity analyses (for FY26) Crude prices: High (+$1/Bbl /Low (-$1/Bbl) Economic growth: High (+1%/Low(-1%) Effect of temperatures: Summer +1 C /Winter -1 C 3

4 Work Flow for Model Analysis Macroeconomic Model (Key Assumptions) GDP Components World economy, Exchange rates Prices/employment/finance, etc. Industrial/service Activities Energy Supply/Demand Model Final Energy Consumption Energy Transformation Demand Crude oil prices Secondary energy prices Temperatures Nuclear/hydro power generation Primary Energy Supply CO2 Emissions Factors defining future supply/demand and various causal relationships are captured quantitatively and consistently. 4

5 Current Status of Energy Demand Electricity Sales Volume Town Gas Sales Volume Fuel Oil Sales Volume Segments - Industry - Residential -Commercial - Transportation

6 Energy Sales Trends Electricity Town Gas Fuel Oils % 3.9%.5% ³ % 5.3% 6.% % -1.4%.1% (1St Half) (1St Half) (1St Half) Electricity sales Town gas sales Seasonally adjusted Seasonally adjusted 15 1 Fuel oil sales Seasonally adjusted Electricity sales are on the rise while being affected by temperatures. 1. Steady increases are seen in large contracts for industrial and commercial sectors. 5 Almost flat with gasoline in an uptrend and fuel oil in a continuing decline Sources: Prepared from METI Monthly Electricity Survey, Monthly Gas Industry Statistics, and Monthly Resources & Energy Statistics 6

7 [Industrial Demand] Electricity, Town Gas, Fuel Oil C Energy demand trends by types Trends in most recent 12 months 11 1 Seasonally adjusted index: 1 for Year 2 Electricity (Large- Industrial Use) Upward trend Year-on-year changes Town Gas Town gas (industrial use) -1-2 Fuel Oil C (excluding power generation use) Electricity (Large- Industrial Use) Fuel Oil C (excluding power generation use) Growing fast Declining -3-4 Industrial Production Slightly sluggish in FY25 Oct 4 Jan'5 Apr 5 Jul Sources: Those mentioned in previous slide and Petroleum Association of Japan Monthly Oil Statistics for energy demand. The Industrial Production chart is prepared from METI Indices of Industrial Production, Shipment and Inventory. 7

8 [Residential Demand] Electricity, Town Gas, Kerosene Energy demand trends by types Seasonally adjusted index: 1 for Year 2 12 Hot spell Trends in most recent 12 months Year-on-year changes +2 Town Gas Electricity (Lighting use) Cool summer Upward trend Flat trend Cool summer -2 Kerosene Electricity (Lighting use) Hot spell Town Gas (Household use) 8 12 Kerosene Slight decline Temperatures (Year-on- year changes) -6-8 Warm to cold winter Cool to warm summer Oct 4 Jan'5 Apr 5 Jul ( C) Sources: Those mentioned in previous slides for energy demand. The temperature chart is prepared from Japan Meteorological Agency data. 8

9 [Commercial Demand] Electricity, Town Gas, Fuel Oil A Energy demand trends by types Seasonally adjusted index: 1 for Year 2 Electricity (for commercial, etc) Upward trend Trends in most recent 12 months Year-on-year changes +2 Electricity Town Gas Town Gas (for commercial, etc.) Fuel Oil A (for commercial) Cool summer Hot spell Fast growing Slight decline -1-2 Temperatures (Year-on- year changes) Fuel Oil A Warm to cold winter Electricity & gas +2 on identical trend Cool to warm summer Oct 4 Jan'5 Apr 5 Jul ( C) Sources: Those mentioned in previous slides and EDMC (IEEJ) estimates for energy demand, The temperature chart is prepared from Japan Meteorological Agency data. Note: Electricity data includes demand under the deregulation program. 9

10 [Transportation Demand] Gasoline, Gas Oil 5,5 ( KL Seasonally adjusted 16 3,5 ( KL Seasonally adjusted 22 Gasoline 2 5, 14 3, Gas Oil 18 Effect of cooler summers 16 4,5 Number of registered gasoline vehicles 12 2,5 Gas oil consumption per vehicle Gasoline consumption per vehicle (1 for 2) Number of registered diesel vehicles (1 for 2) Sources: Prepared from METI Monthly Resources & Energy Statistics, Automobile Inspection & Registration Association Number of Registered Automobiles Demands of gasoline and gas oil as automobile fuels coincide with respective numbers of registered vehicles. In terms of unit fuel consumption, however, gasoline has been declining and gas oil increasing. 1

11 Current Macroeconomic Status General Macroeconomic Indicators (GDP, Prices, etc.) Industrial Materials Production, Other Manufacturing Activities, etc.

12 Key Economic Indicator Trends 25 2 Indices of Industrial Production (Year-on-year changes) (%) Consumer Price Index 1 (%) 5 (Year-on-year changes) Transitional Slump /Q1 24/Q1 25/Q1 Real GDP Growth Annualized quarterly growth rates) Sources: Prepared from Cabinet Office Preliminary National Income Statistics, METI Indices of Industrial Production, Shipment & Inventory, and Ministry of Internal Affairs & Communication Consumer Price Index. Economy is declared to have departed from the transitional slump, moving towards self-sustained recovery. 12

13 Indices of Industrial Production by Industry Type 3-Mo. Moving Average 13 Index: 1 for 2 Transport Equipment Electronic Parts 12 Index: 1 for 2 Materials Industry Iron & Steel Chemicals 11 General Machinery 1 Paper & Pulp 1 9 Machinery Industry Electrical Machinery 9 8 Ceramics, Stone and Clay Jan 4 Apr 4 Jul 4 Oct 4 Jan 5 Apr 5 Jul 5 Oct 5 Jan 4 Apr 4 Jul 4 Oct 4 Jan 5 Apr 5 Jul 5 Oct 5 Source: Prepared from METI Indices of Industrial Production, Shipment & Inventory As inventory adjustment completes, electronic parts and devices show rapid recovery. Electrical machinery is also recovering due to increased exports to China. 13

14 Industrial Materials Production (1) Crude Steel Production (2) Paper/Paperboard Production Mo. Moving Totals (in Million Tons) High-grade materials in good shape, commodity products to be adjusted Paper production on the rise, paperboard is leveling off (3) Cement Production (4) Ethylene Production Temporary upswing due to restoration construction 6. Domestic demand in high gear; capacity production to continue Sources: Prepared from METI Iron and and Steel, Non-ferrous Metal, and Fabricated Metals Statistics, Ceramics & Building Materials Statistics, Chemical Industry Statistics, Paper, Pulp, Plastics Products, and Rubber Products Statistics 14

15 Macroeconomic Outlook GDP and Demand Parameters, Price Indices Industrial Materials Production IIP, Service Activity Index, Transportation Indicators

16 Outlook on Macroeconomic Indicators [Base Case] Actual Forecast Year-on-year Changes (%) FY24 FY25 FY26 FY24 FY25 FY26 Nominal GDP (Trillion yen) Real GDP (Trillion yen) Private sector demand [ 1.5] [ 2.2] [ 1.7] Public sector demand [-.3] [.2] [.2] Overseas demand [.5] [.1] [.2] IIP (1 for 2) Consumer Price Index (1 for 2) Crude Oil Price ($/Bbl) Exchange Rate (yen/$) Sources: Actual figures are from Cabinet Office Preliminary National Income Statistics and others. Forecasts are by IEEJ. Note: Bracketed numbers are GDP growth contribution rates. A total of these may not add up due to minor deviations. For FY26, domestic demand will drive the economy to a 2% growth for the second consecutive year. 16

17 Outlook on Industrial Materials Manufacturing (1) Crude Steel Production, in Million Tons High level continues [Base Case] (2) Paper/Paperboard Production in Million Tons Modest growth continues (3) Cement Production in Million Tons Turning to decline again (4) Ethylene Production, in Million Tons High level continues Sources: Note: All in fiscal year figures 17

18 Outlook on Manufacturing, Services, & Car Registration [Base Case] Actual Forecast Year-on-year Changes (%) Index: 1 for 2 FY24 FY25 FY26 FY24 FY25 FY26 Food products Non-ferrous metals Metals and machinery Indices of industrial production Tertiary industry activity index Gasoline vehicles (in Millions) Diesel vehicles (in Millions) Sources: METI Indices of Industrial Production, Shipment & Inventory and other relevant materials. Forecasts are by IEEJ. For FY26, as inventory adjustment for IT-related equipment completes, electronic parts and devices, electrical machinery, etc. are in excellent conditions. Registration of gasoline vehicles shows a steady increase. 18

19 Energy Supply/Demand Outlook Primary Energy Supply, Final Consumption Electricity, Town Gas and Fuel Oils Sales

20 Assumptions for Nuclear Power Generation Nuclear power plants whose operation had been suspended since FY22 are gradually being brought back to operation. Nuclear power output history & assumptions 4 35 (Billion kwh) Assumptions [Latest additions of nuclear power plants] Jan. 5: Hamaoka No.5 (1.38 Million kw Dec. 5: Higashidoori No.1 (1.1 Million kw) [Planned launch of nuclear power plants] Mar. 6: Shika No.2 (1.36 Million kw [Nuclear Power Growth Rates] FY24: +17.7% 1 FY25: +4.7% FY26: +13.2% 5 FY21 FY22 FY23 FY24 FY25 FY26 2

21 Assumptions for Temperatures (Degree-days) 1st Half (April-September) Cooling Degree-days 2nd Half (October-March) Heating Degree-days 5 4 Cooling Degree-days Average CDD for past 1 years Heat spell Average 11 1 Heating Degree-days Severe winter JMA seasonal forecast factored in Average Cold summer 8 Average HDD for past 1 years Warm winters 1 Cooling degree-days (CDD) are a sum of temperatures above an assumed base level. Cooling degree-days increase as the number of warmer days increases. 7 Heating degree-days (HDD) are a sum of temperatures below an assumed base level. Heating degree-days increase as the number of colder days increases Sources: Prepared from Japan Meteorological Agency data and IEEJ (EDMC) estimates. Actual data is used up to November 25. Notes: CDD: The cumulative sum of differences between mean temperatures for the days that were above 24 C and the base level of 22 C. HDD: The cumulative sum of differences between mean temperatures for the days that were below 14 C and the base level of 14 C. 21

22 Outlook on Final Energy Consumption/Primary Supply 6 55 Primary energy supply (Million TOE*) Actual [Base Case] Forecast Fiscal Year Real GDP (Trillion yen) Real GDP Trillion yen % change year/year Final energy consumption (Million TOE) (TOE = Tons oil equivalent) Primary Energy Supply Final Energy Consumption Million TOE % change year/year Million TOE % change year/year Source: Prepared from Cabinet Office data and EDMC(IEEJ) estimates. Forecasts are by IEEJ. For FY26, energy demand will mark a gradual increase due to recovery in production and other economic activities. 22

23 Domestic Primary Energy Supply [Base Case] Actual Forecast Year-on-year changes (%) (in Million TOE) FY24 FY25 FY26 FY24 FY25 FY26 Coal, etc Oil Natural gas Hydro-power Nuclear New energies Total CO2 (in Million t-c) Source: IEEJ for both actual results and forecasts For FY26, coal supplies will decline in both industrial and utilities sectors. Natural gas will increase due to town gas demand. CO2 emissions will fall for factors including additions of nuclear power plants. 23

24 Final Energy Consumption by Sector [Base Case] Actual Source: IEEJ for both actual results and forecasts Forecast Year-on-year changes (%) (in Million TOE) FY24 FY25 FY26 FY24 FY25 FY26 Industry Residential Commercial Transportation Total For FY26: Industry: Machinery production proceeds actively while materials production declines slightly, resulting in a mild increase in energy demand. Residential: A combined effect of rebounds from higher cooling demand and lower heating demand in FY25. Transportation: The increase in passenger vehicle units in operation is offset by reduction in trucks to level off over-all energy demand. 24

25 Outlook on Energy Sales [Base Case] 1 (Billion kwh) Forecast 4 (Billion m 3 ) Forecast 3 Million KL) Forecast % 1.2% 1.8% % 5.5% 5.7% % -.6% -1.2% 4 2 Electricity Sales Grows in industrial use due to brisk production activity Town Gas Sales Maintains high growth centered around industrial consumption 1 5 Fuel Oils Sales Continues to decline as the shift from oil advances in industries Sources: METI Monthly Electricity Survey, Monthly Gas Industry Statistics, and Monthly Resources & Energy Statistics. Forecasts by IEEJ 25

26 Electricity Demand by Use [Base Case] Actual Forecast Year-on-year changes (%) (Billion kwh) FY24 FY25 FY26 FY24 FY24 FY24 Lighting use Non-lighting use Total Large-industrial use Chemical Iron & steel Machinery and Equipment Sources: Actual results from METI Monthly Electricity Survey & Statistics. Forecasts are by IEEJ. For FY26: Residential: A combined effect of rebounds from higher cooling demand and lower heating demand in FY25. Industry: Steel production declines mainly in electric furnace, while machinery production goes on actively 26

27 Power Generation Mix (Power Utilities: Input basis) (%) [Base Case] Thermal share Oil LNG Coal Hydro Nuclear FY21 FY22 FY23 FY24 FY25 FY26 Source: IEEJ for both actual results and forecasts For FY26, the share of nuclear power will rise due to comebacks of previously suspended plants and newly added plants, while the share of thermal power drops to 55% as coal, LNG, and oil-fired power lose ground. 27

28 Town Gas Sales by Use [Base Case] Actual Forecast Year-on-year changes (%) (Billion m 3 ) FY24 FY25 FY26 FY24 FY25 FY26 Households Commercial Industry Others Total Sources: Actual results from METI Monthly Statistics on Gas Utility Industry. Forecasts by IEEJ. For FY26: Households: Demands for heating and hot water supply to rise in comparison with warmer-than-normal winter of the previous year. Commercial & others: Demands for air-conditioning to decline in comparison with cooler-thannormal summer of the previous year, while demands for heating and hot water supply to rise for the same reason as above. Industry: Substantial upswing due to vigorous production activities in addition to increased fresh demands. 28

29 Fuel Oil Sales by Product [Base Case] Actual Forecast Year-on-year changes (%) (Million KL) FY24 FY25 FY26 FY24 FY24 FY24 Gasoline Naphtha Kerosene Gas oil Fuel oil A Fuel oil B/C Power generation use Total Source: METI Monthly Resources & Energy Statistics. Forecasts by IEEJ. For FY26: Gasoline: A steady increase in passenger vehicle units in operation contributes to a mild growth. Gas oil: Demand to decline due to the continuing downtrend in number of trucks in operation. Fuel oil B/C: Demand for power generation to drop substantially due to the shift to nuclear power. 29

30 Sensitivity Analysis on Factors Affecting Energy Supply/Demand Effects of Crude Oil Price Changes Effects of Economic Growth Changes Effects of Temperature Changes

31 Analysis of Effects on Energy Supply/Demand Base Case FY26: GDP growth = 2.1%; Crude oil CIF price(*) $51/Bbl (*) Based on Prospects for the World Oil Market and Crude Oil Prices for 26 by Ken Koyama, Dec. 16, 25 Crude Prices High Low Crude Price $61/Bbl (Base + $1) Crude Price $41/Bbl Base - $1 Effects of Economic Growth Changes Effects of Temperature Changes GDP growth: Base + 1.% point Base - 1.% point Warm summer(jul.-sep.): Up 1 C Cold winter(jan.-mar.): Down 1 C 31

32 Effects of Crude Oil Price Changes High Price Case (Base plus $1) Low Price Case (Base minus $1) Deviation from Base (%) Deviation from Base (%) Real GDP Consumer prices Primary energy sup. Final energy cons. Industrial sector Res. & Com. sector Transportation sect. Electricity sales Town gas sales Fuel oil sales Real GDP Consumer prices Primary energy sup. Final energy cons. Industrial sector Res.& Com. sector Transportation sect. Electricity sales Town gas sales Fuel oil sales Greater impact is seen in industries and transportation (especially cargo transport) sectors that are sensitive to economic conditions and price changes. Fuel oil sales, being directly impacted by crude oil prices, show wider fluctuations.

33 Effects of Economic Growth Changes [High Growth Case: 1% above Base] [Low Growth Case: 1% below Base] Deviation from Base (%) Deviation from Base (%) Real GDP Consumer prices Primary energy sup. Final energy cons. Industrial sector Res. & Com. sector Transportation sect. Electricity sales Town gas sales Fuel oil sales Real GDP Consumer prices Primary energy sup. Final energy cons. Industrial sector Res. & Com. sector Transportation sect. Electricity sales Town gas sales Fuel oil sales Energy consumption does not change in proportion to GDP changes. Greater effects are seen for fuel oil for industrial and cargo transport sectors and electricity sales for industrial sector.

34 Effects of Temperature Changes [1 C Temperature rise in summer (Jul.-Sep.)] 1 C Temperature fall in winter (Jan.-Mar.) Increase of 2. Million TOE Deviation from Base (%) Increase of 1.8 Million TOE Primary energy sup. Final energy cons. Industrial sector Residential sector Commercial sector Transportation sect. Electricity sales Town gas sales Fuel oil sales Primary energy sup. Final energy cons. Industrial sector Residential sector Commercial sector Transportation sect. Electricity sales Town gas sales Fuel oil sales Summer months: Electricity demand increases sharply on cooling demand. For residential, cooling demand and hot water demand cancel out each other. Winter months: Town gas demand increases sharply on heating and hot water demand.

35 Effects of Oil Price Hike on Economy Direct impact Oil Price Hike Indirect impact Increase in oil import value (income transfer to oil producing nations) Increase in import price Decrease in GDP of net oil importing nations Decrease in income General price hikes (Corporate and consumer prices) Global economic slowdown Decrease in domestic demand Decrease in exports Decrease in GDP The effects on the Japanese economy are two fold; (a) direct impact via income transfer to oilproducing nations and price hikes, and (b) indirect impact via global economic slowdown 35

36 Oil Import Value s s Ratio to Nominal GDP 6% 5% 4% 1st Oil Crisis 2nd Oil Crisis oil import payments A price hike of $1/Bbl escalates by 2. trillion (equivalent to.4% of nominal GDP) 3% 2% Gulf Crisis 1% % Sources: Prepared from Ministry of Finance Japan Trade Monthly Table, Cabinet Office National Accounts. The ratio of oil import value to nominal GDP has remained around 1% since late 198s. 36

37 Oil Dependency and Oil Import Prices Evolvement of oil dependency rate and oil intensity Historical CIF Crude Oil Import Prices Oil dependency rate [% Oil in primary energy supply] ($/Bbl) 52, Dollar-denominated price (Yen/KL 8, , 4, Oil intensity [Oil/Real GDP] (Index=1 for FY1973) ,145 Sources: Prepared from Ministry of Finance Japan Trade Monthly Table, Cabinet Office National Accounts, IEEJ-EDMC Handbook of Energy & Economic Statistics, etc. Energy conservation and shift from oil have significantly progressed since the last two oil crises. Due to the yen s appreciation, yen-denominated crude oil prices have not reached the high levels experienced in the past Yen-denominated price ,

38 Oil Import Value and Income Transfers Crude Price (per bbl) Income Transfers (Tril. Yen) Ratio to nominal GDP FY23 $3 NA NA FY24 FY25 FY26 $39 (+$9) $54 (+$24) $51 (+$21) Cumulative sum: 1.6.3% % % 12.9 (Basis FY23) Trillion yen Oil payments Income transfers (Basis FY23) st Half nd Half st Half Sources: Prepared from IEEJ-EDMC Energy Trend, PAJ Monthly Oil Statistics. Forecasts are by IEEJ. 2nd Half Forecast 1st Half FY24 FY25 FY26 2nd Half Income transfers are on the rise, with the 3-year drainage via income transfers amounting to nearly 13 trillion yen for FY24 through FY26. 38

39 Corporate Earnings Trend & Factors Breakdown Trend on Ordinary Profits Breakdown of Ordinary Profit Factors (Trillion yen) 5 Sales amount Cost of sales 125 Record earnings Labor cost Administrative 1 Ordinary profits Year-on-year quarterly comparison /Q1 23/Q1 24/Q1 25/Q1 Source: Prepared from Ministry of Finance Financial Statements Statistics of Corporations by Industry While the greatest earnings ever were recorded, the impact of high oil prices is currently taking effect. 39

40 Effects of Income Transfers on Various Economies (in the case of a $1/Bbl oil price hike) Billion US$ 1981 Ratio to nominal GDP Billion US$ 24 Ratio to nominal GDP North America 2.6% 4.3% Latin America 7.8% 15.7% Europe (Note) % 38.3% Former USSR % Middle East % % Africa % % Japan % 19.4% Asia-Pacific % [China as part of AP] - - [ 11] [.7% ] Source: Estimated from BP Statistical Review of World Energy, World Bank/WDI data Notes: Excludes Eastern Europe countries for Europe in The symbol denotes negative values. With fast-growing oil imports in recent years, the Asian Region is affected significantly by income transfers in terms of the ratio of an oil import value increment to GDP for a $1/Bbl oil price hike. 4

41 Summary The long term trend in energy demand will be significantly affected by the advancement of energy-saving technologies and other factors. On the other hand, the short-term trend is largely impacted by factors like production activities or temperatures. The Japanese economy in FY26 will proceed along a healthy trend, but the growth in energy demand will remain modest: - Residential: steady; industries: creeping up; transportation: flat - Electricity and town gas to grow; oil to decline While energy demand will increase, CO2 emissions will tend to decline due to factors including new additions of nuclear power plants or increased use of natural gas: - Energy-conserving efforts to be fortified towards 21 (to continue) 41

42 Summary (continued) The effects of temperature changes on energy demand are significant particularly in the following areas: - For summer months: commercial sector and electricity demand - For winter months: residential sector and town gas demand The effects of soaring crude oil prices on economy and energy demand will be minor in the short-term view. - In the long run, fuel switching involving facility modifications or further energy saving measures may be promoted, Contact: report@tky.ieej.or.jp 42