Global electricity demand is forecast to fall

As reported in the FT and other media today, the global consumption of electricity will fall this year for the first time since 1945, according to the International Energy Agency. The watchdog for developed energy consuming countries will tell energy ministers from the G8 that electricity demand will fall 3.5 per cent in 2009.
In China, where power use is seen as a more reliable barometer of economic activity than official economic measures, consumption will be more than 2 per cent lower than 2008. Russia will see a fall of almost 10 per cent, while countries in the OECD will see a fall of almost 5 per cent.Three-quarters of the global decline in consumption is accounted for by industrial rather than household demand, reflecting the fall in demand from China’s manufacturing-heavy economy. Consumption in India, by contrast, is expected to increase 1 per cent.
“This shows how deep a recession we are in,” said IEA chief economist. “Oil demand has declined in the past due to oil price shocks, financial crises – but electricity consumption has never decreased.” In a report published last year, before the extent of the financial crisis was clear, the IEA forecast that electricity consumption would rise 32.5 per cent between 2006 and 2015. World electricity demand grew almost a quarter between 2000 and 2006. In 2007 it rose 4.7 per cent and in 2008, the year the crisis set in, it grew 2.5 per cent.
“It’s a good barometer of economic activity,” according to a leading economist.
Global oil demand, which is more sensitive to consumer sentiment than electricity, has fallen several times since World War 2. The IEA this month forecast oil consumption would be 3 per cent lower in 2009 than 2008, the ninth consecutive lowering of its forecast for this year. The agency will also tell ministers that its calculation of the stimulus spending required from G20 nations on renewable energy was inadequate and should rise by a factor of six if greenhouse gas emissions targets set by the United Nations were to be met. The IEA will also warn that a fall in investment in oil production could lead to a supply squeeze in 2012. The agency said about 2M barrels per day in capacity were cancelled, and another 4.2M have been delayed by at least 18 months.
My question is: will this fall in demand mean that electricity prices are due to fall? The laws of economic supply and demand would indicate that this will be the case, however I suspect that this will not be the case as the speculation currently in the oil market will counteract any downward movement. See my previous blog “Recovery in oil prices defies actual demand”

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