Investing.com -- While North America and Europe have been reducing their reliance on coal for decades, emerging markets are still heavily dependent on it, note analysts at Wells Fargo (NYSE:WFC).
The bank said in a memo this week that China and India, now the world’s largest coal consumers, have seen their consumption surge, even as Western economies pivot toward renewable energy.
Since 2005, coal use in North America and Europe has halved, while India’s has nearly tripled. Together, China, India, and Southeast Asia now represent roughly 75% of global coal demand, a stark increase from 25% in 1990.
“Coal, despite its environmental drawbacks, continues to be a prevalent energy source in large parts of the world,” Wells Fargo analysts wrote, pointing out that affordable and reliable fuel sources are essential to support economic growth in emerging markets.
For example, coal represents 53% of China’s domestic power consumption, according to Energy Institute data. Although China has started investing in green energy, Wells Fargo predicts this shift will take time before renewable sources become dominant.
The analysts acknowledged that while the future is moving toward greener fuels, the global energy transition will likely create investment opportunities that still involve hydrocarbons.
“We expect fossil fuels to remain the predominant source of energy for many emerging economies,” they explained.
Wells Fargo feels that as demand continues in these markets, it is likely to support higher prices for petroleum and natural gas, further bolstering investments in these sectors.