2018 Outlook for Energy: A View to 2040

Each year, ExxonMobil analyzes and updates its long-term view on energy supply and demand. Why is this important? Simply because energy is fundamental to modern life.

Report Feb. 2, 2018

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2018 Outlook for Energy: A View to 2040

A View to 2040

The Outlook for Energy is ExxonMobil’s view of energy demand and supply through 2040. We use the Outlook to help inform our long-term strategies and investments.

A significant energy transition is underway, and many factors will shape the world’s energy future. These include government ambitions and policies that seek to promote prosperity while also addressing the risks of climate change. The recent Paris Agreement1 on climate change provided significant insights on governments’ intentions to reduce greenhouse gas (GHG) emissions through the inclusion in the agreement of nationally determined contributions (NDCs). Policies adopted to support NDCs will likely affect supply and use of energy across society.

To support economic progress and make substantial progress on the climate goals identified in the Paris Agreement, well-designed and transparent policy approaches that carefully weigh costs and benefits are needed. Such policies are likely to help manage the risks of climate change while also enabling societies to pursue other high-priority goals – including clean air and water, access to reliable, affordable energy and economic progress for all people.

Technology will also be vital to improve living standards while addressing climate risks. Advances continue to reshape the energy playing field. Many technologies not prevalent five to 10 years ago have a more significant role today, and their impacts will continue to expand. Examples include wind and solar power, unconventional oil and gas development, and electric cars. Meeting the dual challenge of mitigating the risks of climate change while boosting standards of living will require additional technology advances.

While policies and technologies help shape living standards and the evolution of energy, they also disrupt the status quo and can cause uncertainty and unexpected consequences. Accordingly, as part of the Outlook development process, we develop and use sensitivities to help our understanding of possible energy outcomes.

This year’s Outlook includes several sensitivities on specific areas of interest to provide greater perspective on how changes to our base Outlook assumptions could affect the energy landscape.

This year’s Outlook also includes a new section, “Pursuing a 2oC Pathway.” This section utilizes work coordinated by the Energy Modeling Forum at Stanford University2. It provides a view of potential pathways toward a 2oC climate goal, and the implications such pathways might have in terms of global energy intensity, carbon intensity of the world’s energy mix and global demand for various energy sources. The section concludes with a discussion of the need to pursue practical, cost-effective solutions to address multiple goals simultaneously. The Outlook anticipates significant changes through 2040 across the world to boost living standards, reshape the use of energy, broaden access to abundant energy supplies, and accelerate decarbonization of the world’s energy system to address the risk of climate change.

A role for everyone

Seven billion people shape the world’s energy system and have a direct impact on the fundamental drivers of energy demand. Energy impacts the economy as well as security and environmental goals. Energy solutions can vary over time and circumstances. Think about how access to energy affects your own life, and how that translates to billions of other people around the world. Compare your own conclusions on the energy future with those in the Outlook.

Energy is fundamental to modern life, and as the world’s population approaches 9 billion people in 2040, we are challenged to improve living standards everywhere. We expect that progress will be powered by human ingenuity and the energy that helps make better lives possible.

Key takeaways at a glance

Key trends that will play a defining role in our global energy landscape through 2040.

Energy powers modern economies and living standards

By 2030, the world's economic middle class will likely expand from 3 billion to more than 5 billion people. This growth will coincide with vastly improved living standards, resulting in rising energy use in many developing countries as people develop modern businesses and gain access to cars, appliances and air-conditioned homes.

Graphic of male and female figures.
Global energy needs rise about 25 percent, led by non-OECD nations

Despite efficiency gains, global energy demand will likely increase nearly 25 percent. Nearly all growth will be in non-OECD countries (e.g. China, India), where demand will likely increase about 40 percent, or about the same amount of energy used in the Americas today.

Graphic showing 25% raise in global energy needs.
Electricity demand nearly doubles in non-OECD nations

Human activity continues to be dependent on reliable supplies of electricity. Global electricity demand will rise by 60 percent between 2016 and 2040, led by a near doubling of power demand in non-OECD countries.

Graphic of power lines.
Electricity from solar and wind increases about 400 percent

Among the most rapidly expanding energy supplies will be electricity from solar and wind, together growing about 400 percent. The combined share of solar and wind to global electricity supplies is likely to triple by 2040, helping the CO2 intensity of delivered electricity to fall more than 30 percent.

Graphic of solar and wind energy technology.
Natural gas expands role to meet a wide variety of needs

The abundance and versatility of natural gas make it a valuable energy source to meet a wide variety of needs while also helping the world shift to less carbon-intensive sources of energy. Natural gas use is likely to increase more than any other energy source, with about half its growth for electricity generation.

Graphic showing natural gas flame.
Oil plays a leading role to aid mobility and modern products

More electric cars and efficiency improvements in conventional engines will likely lead to a peak in liquid fuels use by the world's light-duty vehicle fleet by 2030. However, oil will continue to play a leading role in the world's energy mix, with growing demand driven by commercial transportation and the chemical industry.

Oil barrel graphic.
Decarbonization of the world's energy system will accelerate

As the world's economy nearly doubles by 2040, energy efficiency gains and a shift to less carbon-intensive sources of energy will contribute to a nearly 45 percent decline in the carbon intensity of global GDP. Global energy-related CO2 emissions will likely peak by 2040 at about 10 percent above the 2016 level.

Graphic showing 45% decline in the carbon intensity of global GDP.

Behind the scenes: How we forecast to 2040

ExxonMobil uses a data-driven, bottom-up approach to produce a most-likely view of future energy demand and supply.

Foundation

We create a starting point for our projections using International Energy Agency (IEA) annual data, along with third-party data and recent energy trends.

Economic growth 

Since population and living standards drive energy demand, we forecast demographic and economic trends for about 100 regions covering the world.

Demand for services 

These drivers, along with consumer preferences, help us determine demand for energy across 15 sectors, covering needs for personal mobility, electricity in buildings, production of steel, cement and chemicals, plus many others.

Energy sources 

We then match the demand for energy services with about 20 types of energy (e.g., diesel), taking into account potential evolution of technology, policies, infrastructure and more.

Policy/tech changes 

We actively monitor changes in technology and policies and compare our views of the Outlook to a variety of third-party estimates.

Test uncertainty

We also run sensitivities (i.e., changes to our base assumptions) to assess the impact on our forecast if things were to play out differently.

Sources

  1. http://unfccc.int/paris_agreement/items/9485.php
  2. EMF was established at Stanford in 1976 to bring together leading experts and decisionmakers from government, industry, universities, and other research organizations to study important energy and environmental issues. For each study, the Forum organizes a working group to develop the study design, analyze and compare each model’s results and discuss key conclusions. https://emf.stanford.edu/about. EMF is supported by grants from the U.S. Department of Energy, the U.S. Environmental Protection Agency as well as industry affiliates including ExxonMobil. https://emf.stanford.edu/industry-affiliates

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Shareholder engagement on the future of energy and carbon

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Expanding the energy frontier in every direction

When it comes to new oil and gas discoveries, the map of the world is far from static. Tomorrow’s major energy producer may only be a minor player today, a trend that keeps the global flow of energy spinning like the needle on a compass.

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Energy supply

What resources will be available to meet the world’s increasing demand for more energy? Technology advancements underpin the diversification of energy choices. 

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Download the Outlook for Energy reports

Download the 2018 data book, 2018 data pages and the glossary.

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Pursuing a 2°C pathway

Addressing the risks of climate change implies a variety of potential future pathways that would affect supply and use of energy across society. Advancing the application of cost-effective technology solutions will likely be critical to pursue a 2oC pathway, while helping keep energy reliable and affordable.

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Energy demand

Global energy demand will continue to rise through 2040, reflecting its fundamental link to growing prosperity and better living standards for an increasing population worldwide.

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