Energy supply and demand trends

The Outlook for Energy is ExxonMobil’s view of energy demand and supply through 2040 and helps inform ExxonMobil’s long-term strategies, investment plans and research programs. Given the uncertainty around the near-term impacts of COVID-19 on economic growth, energy demand and energy supply, and lack of precedent, the Company is considering a range of recovery pathways to guide near-term plans. These pathways expect that energy demand will grow beyond 2019 levels post-2022 as COVID-19 impacts phase out and long-term drivers prevail.

Report Jan. 5, 2021

In this article

Energy supply and demand trends

Energy supports rising prosperity

Access to modern technologies and abundant energy – including oil and natural gas – enables substantial gains in living standards around the world.

Between now and 2040, the world population is expected to grow from 7.5 billion to well over 9 billion, and global gross domestic product (GDP) is expected to nearly double. Billions of people in developing economies are expected to see their incomes grow to levels considered middle class.1

Given population growth and the linkage between energy use and living standards, energy demand is likely to rise over this same time period. Efficiency gains and a shift in the energy mix – including rising penetration of lower-carbon sources – enable a nearly 45 percent improvement in the carbon intensity of global GDP.

COVID-19 near-term impact

Government responses to COVID-19, resulting in lockdowns and severe travel restrictions, significantly reduced energy demand in the short term. However, it is widely expected that demand will recover in the years ahead. For example, energy demand in countries that are further along the recovery path, such as China, has started to return to pre-COVID-19 levels.

As society recovers and energy demand increases, the following trends are projected by the International Energy Agency (IEA) in its latest publication of the World Energy Outlook. This includes the IEA's assessment of the COVID-19 impact, both in its scenario based on stated policies, known as STEPS, as well as its Sustainable Development Scenario (SDS), which limits the rise in global average temperature to well below 2°C:

  • Wind and solar (included in Other renewables) are projected to see strong growth.
  • Coal’s share in the energy mix will likely decrease as the world shifts to lower-emission energy sources.
  • Oil and natural gas will continue to play an important role in the world’s energy mix (each making up more than 20 percent) as commercial transportation fuel (e.g., trucking, marine) and as feedstock for chemical products, which will continue to see demand growth.

The IEA's 2020 STEPS projects demand for oil and natural gas by 2040, approximately 2 to 3 percent lower than in its pre-COVID-19 2019 STEPS projection. In the IEA's 2020 SDS projection for 2040, oil demand is virtually unchanged and natural gas is estimated 7 percent lower than in the 2019 SDS projection

Global fundamentals impact Outlook for Energy

Oil and natural gas remain important

(Quads)
EM analysis; IEA World Energy Outlook (WEO) 2020 

Oil and natural gas remain important

(Quads)

The lockdown measures taken by many authorities in response to COVID-19 resulted in lower greenhouse gas emissions but also had significant economic impacts. The International Labour Organisation estimated that income declined 10.7 percent globally during the first three quarters of 2020 versus 2019, which amounts to US$3.5 trillion, or 5.5 percent of GDP, affecting middle-income countries and lower-middle-income countries more than upper-middle-income countries.2

As the world recovers from COVID-19, a focus on addressing environmental risks, including the risks of climate change, while providing accessible and affordable energy for a post-pandemic world remains important. The chart on the upper right illustrates that emission reductions will be needed across all sectors, especially in developing economies.

Addressing the dual challenge

Consistent with third-party assessments, ExxonMobil expects the world to meet, in aggregate, the Nationally Determined Contributions3  of the Paris Agreement pledges by 2030. However, more effort is needed for the world to accelerate progress toward a 2°C pathway.4 Recent announcements by some governments further strengthen this effort. The IEA concludes that the full implementation of recent net-zero pledges by 2050 as well as the Chinese government's 2060 net-zero commitment, would cover around 50 percent of the energy-related CO2 emission reductions required to move from its STEPS scenario to its well below 2°C scenario or SDS scenario.5

These net-zero announcements are often based on deployment of existing technologies, even though those governments acknowledge there are scale and cost limitations. Because of these limitations, further technology breakthroughs are expected to play a major role in accelerating progress toward 2°C and net-zero pathways. The IEA in 2020 estimated in its Tracking Clean Energy Progress analysis that only six of 46 technologies and sectors assessed are on track to help reach the Paris Agreement climate goal;6 therefore, further efforts will be required. When comparing the emissions of the IEA STEPS scenario with those of the IEA SDS scenario from 2019 to 2040, just over half of the emission reduction effort would be realized by efficiency improvements. Beyond reduced energy demand through efficiency improvements (97 billion tonnes), the chart below demonstrates the crucial contribution of the wide range of low-emission technologies needed to reduce energy-related emissions.

2017 global energy-related CO2 emissions by sector

(Billion tonnes)
ExxonMobil 2019 Outlook for Energy

Technology developments beyond efficiency improvement needed to further reduce emissions 

Delta of avoided emissions between SDS and STEPS '19-40 
IEA World Energy Outlook (WEO) 2020 

1 BROOKINGS INSTITUTION, There are many definitions of "middle class" - here's ours, Richard V. Reeves and Katherine Guyot Tuesday, September 4, 2018, accessed December
2020 
https://www.brookings.edu/blog/up-front/2018/09/04/there-are-many-definitions-of-middle-class-heres-ours/

2 International Labour Organization, ILO Monitor: COVID-19 and the world  of work. Sixth edition, Updated estimates and analysis, 23 September 2020, accessed December 2020.
ttps://www.ilo.org/wcmsp5/groups/public/@dgreports/@dcomm/documents/briefingnote/wcms_755910.pdf

3 Article 4 paragraph 2 of the Paris Agreement
https://unfccc.int/files/meetings/paris_nov_2015/application/pdf/paris_agreement_english_.pdf

4 Reference is made to the first set of NDC submissions made in 2015; new or updated NDCs are anticipated, but not included as part of this analysis as only a few countries have updated their NDCs at this time. Additional NDC submissions are anticipated ahead of the 26th United Nations Climate Change Conference in 2021

5 IEA, 2020. Achieving  net zero emissions, C. McGlade, D. Crow,  19 November, 2020, accessed December 2020.
https://iea.blob.core.windows.net/assets/4b4be30b-bb86-4a3c-982f-5b49e3380917/WEOWeek-Gettingtonetzero.pdf

6 1EA, 2020. Uneven progress on clean energy technologies faces further  pressure from the Covid-19 crisis, 5 June 2020, accessed December 2020.
https://www.iea.org/news/uneven-progress-on-clean-energy-technologies-faces-further-pressure-from-the-covid-19-crisis

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