Grim Forecast for Energy Demand as 'Secular Stagnation' Sets In

Consensus is growing that the global economy is becoming mired in stagnation nearly everywhere -- and that it holds major implications for future energy demand and, in turn, energy businesses worldwide.

Major international institutions are increasingly sounding the alarm that the world's economy is slowing precipitously and that the slowdown appears to be driven by demand, not faltering output.  The latest backer is the normally upbeat International Monetary Fund (IMF), which is publishing its new World Economic Outlook later this week.
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The IMF's forecast sees slower growth in both the developed and developing world, and expresses fears that huge government debt loads in advanced economies leave policymakers with few tools to improve the picture for the foreseeable future.
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Taking the pessimistic view on growth

Firms reliant on rising energy demand will find the research in Chapters 3 and 4 of the IMF's new report troubling.  Those chapters were posted in advance last week.

In them, the IMF weighs in on a debate that has been raging in economist circles for at least two years.  It sides with the pessimists, arguing that the "secular stagnation" theory is likely correct and that the world is entering a state of persistent slow growth.

IMF believes that demographics are a decisive factor.  Also to blame, it says, is the slowing pace of technological innovation.  Productivity growth appears to be slowing, as well, it says, in both developed and developing nations.

With population growth slowing and populations in the West, South Korea and Japan aging rapidly, demand from these markets is slowing along with those trends. In at least five major economies -- Japan, South Korea, Germany, Italy and Spain -- populations are expected to gradually decline, representing in sum a wealthy economy of roughly 365 million where energy requirements are either flat or falling.

The economies that the Organisation for Economic Co-operation and Development, or OECD, fears will have perpetually weakening demand are not limited to Japan and Europe.  Economic performance in the United States has disappointed lately, and first-quarter 2015 growth may register as low as 1 percent by some estimates.  And while many economists assumed that low gasoline prices would boost consumer spending, that didn't happen.

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