World Energy Outlook 2006

for heating, and faster improvements in end-use energy efficiency. Demand for
transport fuels and electricity have continued to grow in an almost linear
fashion with, though at a slower rate than, GDP since the 1970s.
Despite higher oil prices since 2002, the economies of most countries around
the world have continued to grow strongly. The world economy grew by 5.3%
in 2004 – the fastest rate since 1973. Preliminary estimates put growth at 4.9%
in 2005. These rates are well above the average of 3.1% over the period 1980-
2003. All major regions saw their growth accelerate in 2003 and 2004, though
most countries experienced a slowdown in 2005 and early 2006. OECD
countries’ GDP grew by 2.8% in 2005, down from 3.3% in 2004. A revival of
the Japanese economy and the continuing strength of the US economy have
been partially offset by continuing sluggish growth across much of Europe.
Developing countries and the transition economies have enjoyed above-average
rates of GDP growth. China’s GDP surged by around 10% in both 2004 and
2005, while growth in India averaged 8%. Middle East economies have picked
up sharply, thanks to higher oil-export revenues. There are signs that GDP
growth in most regions may decline further as interest rates rise in response to
increasing inflationary pressures, resulting from the surge in oil and other
commodity prices. Chapter 11 assesses in detail the macroeconomic impact of
higher energy prices.
GDP growth is expected to slow gradually over the projection period in all
regions (Table 1.2). 3 World GDP is assumed to grow by an average of 3.4% per
year over the period 2004-2030. Growth drops from an average of 4% in
2004-2015 to 2.9% in 2015-2030. Developing Asian countries are expected to
continue to grow faster than any other region, followed by the Middle East and
Africa. The Chinese economy is assumed to grow fastest at 5.5% per year over
the projection period, overtaking the United States as the world’s largest
economy in PPP terms by around 2015. Growth nonetheless slows as the
economy matures and population levels off. GDP in the OECD as a whole is
assumed to grow by 2.2% per year over the projection period. Growth rates in
the three OECD regions are expected to slow progressively over the projection
period, as population growth slows or reverses and their economies mature. All
regions continue to experience a decline in the share of energy-intensive heavy
manufacturing in economic output and a rise in the share of lighter industries
and services, particularly in the developing world where the process is least
advanced.
Combining our population and GDP growth assumptions yields an average
increase in per-capita income of 2.4% per annum, from $9 253 in 2004 to
$17 196 in 2030 (in PPP terms and year-2005 dollars). Per-capita incomes
3. The same macroeconomic and population assumptions are used in the Alternative Policy Scenario.
58 World Energy Outlook 2006 - THE REFERENCE SCENARIO
© OECD/IEA, 2007