NEW YORK, N.Y. – Exxon Mobil says the drive for higher living standards around the world will keep demand for electricity and transportation fuels growing even as economies get more efficient and governments put a price on pollution.
The company’s annual long-term energy outlook, released Thursday, predicts world energy demand will grow 35 per cent by 2040 as electricity and modern fuels are brought to some of the billions of people in the developing world who currently live without power or burn wood or other biomass for cooking and heating. Those growing needs will be somewhat offset by a slow decline in consumption in the far more energy-hungry economies of the developed world.
“People want a warm home, a refrigerator, a TV, someday a car, and a cellphone,” said William Colton, Exxon’s vice-president for corporate strategic planning, in an interview.
There are ample supplies of fuel to meet the world’s demands, according to the report, and Colton concludes that average annual growth of 1 per cent per year is manageable for the world’s energy companies.
Exxon’s outlook, which forecasts world energy demand through 2040, is noted by investors and policymakers, and used by Exxon to shape its investments. “The last thing we want to do is delude ourselves about the future,” Colton said. “We make billion-dollar decisions on this.”
The report’s conclusions largely agree with those reached in other long-term energy forecasts, including a recent report by the International Energy Agency.
The outlook predicts demand for oil and natural gas — Exxon’s main products — will grow steadily because shippers and truckers will need more diesel to move more goods and utilities will need additional natural gas to make electricity for more people.
Use of coal, now the chief fuel for electricity and the second most important fuel in the world after oil, will flatten in the next decades and slip to third place as countries shift to cleaner natural gas. Nuclear power and renewable electricity sources such as wind, solar and biofuels will grow fastest of all, but remain a small part of the energy mix by 2040 because they will remain expensive.
Exxon expects governments to impose costs on fossil fuel consumption and subsidize renewable energy in an effort to reduce emissions of gases that scientists say are causing climate change. Exxon expects those costs to be roughly $80 per ton of carbon dioxide— a price that may be explicit in the form of a carbon tax or baked in to the cost of new technology and equipment needed to meet stricter emissions limits. —
“In one way or another governments will put in place policy that will increase the cost of hydrocarbons, whether it’s on supply or consumption,” said Ken Cohen, Exxon’s vice-president of public and government affairs.
That, along with the drive to reduce costs, will lead to dramatic gains in energy efficiency. Minimum fuel economy requirements in the U.S. and elsewhere are making cars much less thirsty, and stronger building codes and appliance standards will help make homes and businesses more efficient. The slow switch from coal to natural gas, which emits about half the carbon dioxide as coal, will also help slow the growth of climate-changing gases.
Energy-related carbon dioxide emissions are expected to continue to grow through 2030, before levelling off and beginning a slow decline.
Traditional fossil fuels will remain abundant, thanks to improvements in drilling technology. Drillers have learned to extract oil and gas from formations deep offshore and in shale and other rocks that were once impossible to tap. The amount of oil that can be extracted with today’s technology is growing, even though the world burns 90 million barrels of it every day.
By 2040, Exxon says, 65 per cent of the world’s recoverable crude oil will still be in the ground.
A problem for drillers, though, is that the new oil that is being unlocked is more and more expensive to produce. That puts enormous strain on the global energy industry as it works to develop new fields to meet rising demand as current fields decline.
Despite the boom in oil production in North America, the Middle East will remain the centre of world oil production. Exxon predicts the nations of OPEC will produce 45 per cent of the world’s oil by 2040 — up from about one-third now.
Jonathan Fahey can be reached at http://twitter.com/JonathanFahey .