Exxon Mobil recently released its Outlook for Energy 2017, which forecasts global supply and demand for energy through 2040. The major result of the forecast is that the mix of the world’s energy use in 2040 will be very similar to what it was in 2015. Fossil fuels supply 77 percent of global energy demand in 2040, slightly less than their share in 2015. Oil will remain the world’s primary energy source, providing almost one-third of energy demand in 2040, followed by natural gas, which supplies 25 percent and coal, which supplies 20 percent. There are sufficient fossil fuel resources to meet demand. In fact, according to Exxon, 85 percent of the world’s natural gas resources are untapped, which is enough natural gas to supply current global demand for more than 200 years. That is not to say that renewable energy stagnates. In fact, by 2040, nuclear and renewable energy increase by 50 percent and combined approach 25 percent of energy demand.[i]
Despite global population growing by 25 percent (1.8 million more people by 2040), global carbon dioxide emissions only increase by 10 percent. In Exxon’s forecast, carbon dioxide emissions peak in the 2030s and then decline. The slow growth in carbon dioxide emissions is due to more efficient buildings, increased transportation fuel economy, technological advances in manufacturing and power plant efficiencies, and shifts to less carbon-intensive energy—natural gas, nuclear and renewables.
The Global Energy Mix
While natural gas, nuclear, wind and solar power gain shares in the 2040 energy mix compared to 2015, the gains are not sufficient to alter fossil fuel’s domination much in the 25 year forecast. In 2040, oil has a 32 percent share; natural gas, 25 percent; coal, 20 percent; nuclear energy, 7 percent; wind, solar, and biofuels, 4 percent; and other, including hydroelectric power, 12 percent. Coal’s share decreases as renewable energy, nuclear power and natural gas increase their shares.
Demand for petroleum liquids is expected to increase 20 percent through 2040, with Latin America, Africa, Russia, the Middle East, and Asia accounting for the largest increases.[ii] Oil remains the world’s primary energy source due to demand for transportation fuel and feedstock for the chemical industry. Plastics and other advanced materials made from oil provide energy efficiency gains and other advantages to manufacturers and consumers.
Europe and Asia are expected to be the major net importers and the United States, Middle East, and Russia the major exporters.
Production from tight oil, deep water, and oil sands reserves are expected to account for over 25 percent of the liquid supply, with the United States producing the majority of all tight oil in 2040. However, continued investment in conventional crude and condensate will be required to offset the decline in existing oil fields. According to Exxon, the continued demand for liquids through 2040 will require about $450 billion in investment. Without that investment, liquids production will decline since 80 percent of the current new liquids supply is needed to offset declines in conventional oil fields.
Natural gas demand is expected to increase significantly, with the fuel gaining share across all sectors due to its abundance and flexibility. It is projected to grow the most of any fuel, accounting for a quarter of all demand by 2040. As natural gas supply and demand grow, North America, Russia, and the Middle East become net gas exporters by 2040. Unconventional gas is expected to account for 33 percent of total gas production in 2040.
Asia is expected to continue to be the largest gas importer, with regional natural gas demand doubling by 2040. European demand for natural gas is also expected to increase. To meet increasing demand, liquefied natural gas (LNG) will become a major player, with new exports expected from the United States, Canada, Australia, and East Africa. North America is expected to become the largest exporter due to growth in its unconventional natural gas resources. With a highly competitive market for LNG, lower cost supply sources have the advantage.
Over half of the forecasted energy demand growth is in the electricity sector to support increasingly digital and plugged-in lifestyles. In 2040, the industrial sector requires 50 percent more electricity for facilities and equipment that manufacture goods. The residential and commercial sectors are expected to require 70 percent more electricity for homes, offices, schools and hospitals. But, the largest increase of 130 percent is in the transportation sector as it moves towards more electric vehicles and more public transportation. Despite the huge increase, transportation only accounts for 2 percent of total electricity use in 2040.
Coal use in the generation sector is expected to decline by 10 percent and electricity from wind and solar is expected to increase by 360 percent by 2040.[iii] By 2040, natural gas is expected to compete with coal as a fuel for generation in the global mix as the graph below depicts.
Despite the Paris Agreement ratified last November, Exxon Mobil expects carbon dioxide emissions to increase by 10 percent by 2040, but less than the 25 percent increase expected in global energy demand. The major portion of the growth in energy demand (45 percent) is expected to be in China and India, whose growing populations are in need of electrification. Growing populations lead to greater travel, additional cars on the road and increased commercial activity to deliver goods and products, which require more energy. Exxon Mobil expects fossil fuels to remain the major energy players, providing 77 percent of the energy needed in 2040, but the largest percentage growth will be in renewable energy.
[i] Exxon Mobil, Outlook for Energy; Journey to 2040, http://corporate.exxonmobil.com/en/energy/energy-outlook/highlights/ and https://energyfactor.exxonmobil.com/news/energy-future/
[ii] Oil Price, Exxon’s 2040 Outlook: Fossil Fuels Aren’t Going Anywhere, December 30, 2016, http://oilprice.com/Latest-Energy-News/World-News/Exxons-2040-Outlook-Fossil-Fuels-Arent-Going-Anywhere.html
[iii] Exxon Mobil, Outlook for Energy: A View to 2040, http://corporate.exxonmobil.com/en/energy/energy-outlook