Report Aug. 28, 2023
Energy demand: Three drivers
Policy. Technology. Consumer preferences. All three affect how the world uses energy. Each driver influences the others. The interplay varies depending on local circumstances (available resources, public support) and can change over time. At ExxonMobil, we’re continually studying energy demand and developing models that measure its potential impact — all in an effort to gain a deeper understanding of the interconnectivity of the global energy system.
Report Aug. 28, 2023
Three drivers of energy demand
New technology enables people to do more with less. The most successful technologies often have the supporting government policies and commercial frameworks to achieve scale. A policy like tax incentives can spur development of new technology, which then needs to compete without subsidies to reach a large enough scale to impact global markets. Consumer preferences can also create a “pull effect” that increases demand in the marketplace for new technologies.
Clear and consistent government policies can stimulate new technology and influence consumer choices. For example, policies can encourage adoption of new technology (free parking for electric vehicles) or discourage the use of an existing technology (restrictions on coal-based power). The corollary is also true: Policy not enabled by competitive technology or not aligned with consumer preferences can be difficult to implement. It is hard to mandate something that consumers believe is inferior to current options.
Demand for energy and products begins with the choices consumers make. These preferences can shift as new technology enables better options, such as lower costs and lower emissions. Consumer preferences can also be altered over time by policies that reward choices, like a carbon tax that encourages lower-emission electricity supply.
Global energy demand by sector
Primary energy – Quadrillion Btu
Developing countries lead energy demand
Primary energy – Quadrillion Btu
- Global demand reaches about 660 quadrillion Btu in 2050, up about 15% versus 2021, reflecting a growing population and rising prosperity.
- Residential and commercial primary energy demand declines by approximately 15% to 2050 as efficiency improvements offset the energy needs of a growing population.
- Electricity generation is the largest sector and one of the fastest-growing, driven mainly by expanding access to reliable electricity in developing countries. Growing electrification is partially offset by efficiency gains in the developed countries.
- Industrial sector growth supports construction of buildings and infrastructure, plus the manufacturing of products that meet people’s needs.
- Commercial transportation grows as expanding economies increase the need to move goods. Personal mobility also expands, but efficiency improvements and more electric vehicles offset the increase in vehicle miles traveled.
- Global energy consumption continues to shift proportionally to developing economies where population and economic growth are both faster than the global average. Non-OECD share of global energy demand reaches around 70% in 2050.
- Developing countries account for more than 100% of the global energy demand growth.
- Efficiency gains outpace economic growth in developed countries, which helps offset energy demand increases historically linked to economic expansion.
- The combined share of energy used in the U.S. and Europe declines from about 30% in 2021 to about 20% in 2050.
- Renewables and nuclear see strong growth, contributing around 70% of incremental energy supplies to meet demand growth.
- Natural gas grows over the period, reaching almost 30% of all demand.
- Oil continues to play a leading role, with growing demand driven by commercial transportation and feedstocks for the chemicals industry.
- Coal use remains significant in parts of the developing world. It drops below 15% global share as China and developed nations shift toward lower-emission sources like renewables, nuclear and natural gas.
- Electricity, an energy carrier and not an energy source, grows approximately four times faster than overall energy demand.
Large range of outcomes for individual fuel sources across scenarios
Share (%) by fuel type within primary energy mix in 2050
- It is important to understand how the Outlook and scenarios are developed and used. Learn more about how we develop the Outlook and how we use scenarios.
- The IEA’s Stated Policies Scenario (STEPS) reflects current policy settings based on a sector-by-sector assessment of the specific policies that are in place, as well as those that have been announced by governments around the world. It offers a relevant scenario to compare and contrast with our Outlook, which also reflects current policy.
- The IPCC Lower 2°C scenario and the IEA Net Zero by 2050 scenario are targeting more stringent climate goals, aligned with the Paris Agreement. There is a wide range of potential outcomes under the IPCC’s Lower 2°C scenarios, as many of the necessary technologies will require innovation and policy support to accelerate deployment.
- By 2050, the current sources all still play a role in the global energy mix:
- In most of the scenarios, coal use declines more than the Outlook projects.
- Solar and wind would have to accelerate their buildout rates to be in line with the scenarios
- Biomass can play an important role providing biofuels for transportation, even providing negative emissions if CO2 from the flue gases of power plants can be captured and stored.
Oil and natural gas are important contributors to the energy system.
- While nuclear has the ability to provide energy at scale and with low emissions today, few scenarios project high growth.
- The IEA NZE by 2050 is an even more stringent pathway to reduce emissions than the average of the IPCC Lower 2°C scenarios. It accelerates growth of lower-carbon solutions while also further reducing fossil sources.
Commerce and trade increase transportation energy consumption by almost 25% by 2050. The movement of people and goods has grown dramatically over the past few decades, driven by vast growth in the purchasing power of individuals. Likewise, technology advancements have provided new and more efficient ways to get around.
Global transportation demand is driven by differing trends for commercial transportation and light-duty passenger vehicles. As economic activity expands, especially in developing regions, commercial transportation is expected to grow. Most of the growth comes from heavy-duty trucking as a result of goods movement. Increased aviation travel also plays a role as individual purchasing power expands.
Passenger vehicle ownership and travel is expected to increase as a result of the dramatic growth in the middle class and expanded urbanization. The fuel mix continues to evolve with more alternatives including electric vehicles (BEV and PHEV).
Hypothetical sensitivities for light-duty demand showed that if by 2035, every new car sale was an electric vehicle, liquids demand would still remain around 2010 levels by 2050. Alternatively, a slowdown in fuel efficiency improvement of internal combustion engines could increase fuel demand by almost 3 million barrels per day by 2050
Global transportation energy demand
Million of oil-equivalent barrels per day
- Global transportation-related energy demand is expected to grow by more than 30% from 2021 to 2050.
- Personal vehicle ownership continues to grow as purchasing power rises. Higher efficiency and more electric vehicles lead to a peak, followed by a decline in light-duty vehicle energy demand in the mid-2020s.
- Commercial transportation (heavy-duty trucking, aviation, marine and rail) energy demand is led by growth in economic activity and personal buying power, which drives increasing trade of goods and services.
- Aviation demand sees the highest compounded annual growth rate at about 3.5% from 2021 to 2050, benefiting from rising economic activity and the rapid growth of the middle class, specifically in emerging economies.
Light-duty fleet by type
EVs take market share – Billion fleet vehicles
Light-duty demand drops
Million of oil-equivalent barrels per day
Personal mobility rises with incomes, resulting in a growing demand for cars and motorcycles.
- Motorcycles offer a lower-cost entry point to personal mobility, with ownership particularly high in Asia Pacific.
- China and India lead the growth of car ownership, with larger growth in developing countries.
- In developed nations, while the number of cars per 1,000 people increases, the associated vehicle fuel demand declines by around 40% by 2050.
- In 2021, the global fleet was about 1.2 billion vehicles, with 16 million (1.3%) of the fleet being plug-in hybrids, battery electric, or fuel cell.
- By 2050, these advanced vehicles grow to approximately 44% of the fleet (920 million) and more than 50% of new car sales, driven by decreasing battery costs, policies for tailpipe emissions, efficiency and reduced dependence for countries that must import oil. In the near term EV sales grow from 6.4 million in 2021 to 33 million in 2030 at a compounded annual growth rate of about 20%.
- Light-duty vehicle demand for internal combustion engine (ICE) fuels is projected to peak mid decade and then decline to levels seen in the early-2000s by 2050.
- The reduction in fuel demand, while driven in part by electrification, is mostly connected with efficiency gains across all vehicle types.
Light duty fuels demand sensitivity: 100% BEV sales in 2035
- Accurately calculating the reduction of CO2 emissions achieved by using electric vehicles instead of internal combustion engines requires counting the emissions associated with the incremental electricity required to power the EV.
- This light-duty vehicle sensitivity analysis helps assess the potential impact to light-duty liquids demand using alternate assumptions around EV penetration, changes in fuel efficiency or broader mobility trends.
- In the Outlook, we project battery-electric vehicles to be 24% of all new car sales by 2035 and 36% by 2050. This sensitivity assumes 100% battery electric vehicle sales from 2035 onward, resulting in an almost fully electrified global car fleet by 2050 (97% BEV).
- This 100% electric fleet would reduce global demand for oil (excluding biofuels) to around the same level it was in 2010. CO2 emissions decrease about 4% versus the Outlook, with the decline in light-duty CO2 emissions partially offset by emissions from increased power generation.
- The Outlook projects that fuel efficiency will improve at about twice the rate observed from 2000 to 2021. If the improvement rate is similar to historical levels, fuel demand in 2050 may be almost 3 million barrels per day higher.
All modes of commercial transportation grow
- Commercial transportation rises in all regions, with 80% of the growth in developing countries, driven by increases in population and GDP.
- While all regions see some increased demand, Asia Pacific leads the growth, accounting for more than 40% of commercial transportation energy demand by 2050.
- Continued improvements in efficiency will moderate the sector’s energy demand, which is historically associated with expanding economic activity.
- All modes of commercial transportation grow from 2021 to 2050, with heavy-duty transportation growing the most and air transportation growing the fastest.
- Electrification plays a role in certain applications, like short-haul trucks and buses. It is less suitable in heavy long-haul, international marine, or aviation, which require higher energy storage to meet range requirements.
- Hydrogen is expected to make inroads into commercial transportation as technology improves to lower costs and policy develops to support the needed infrastructure development.
- Natural gas (LNG on ships) and biofuels (sustainable aviation fuels) are expected to take a larger share than electricity for these sectors.
Heavy-duty transportation demand is driven by economic activity, which leads to increased commerce and movement of goods across oceans, nations, and cities. Fuel demand in this sector is influenced by the type of truck and its use, so understanding fleet dynamics and fuel usage is important for projecting future demand. For example, a light commercial vehicle (LCV) for intra-city deliveries has different energy needs than a heavy commercial vehicle (HCV) for cross-country shipments of goods. Truck fleets also vary by region.
2015 Heavy-duty fleet/fuel usage mix
- Fleet breakdown and truck usage play a critical role in understanding the types of alternate fuels available for substitution in trucking.
- In 2015, HCV long-haul trucks made up about 15% of the fleet and used approximately 55% of the fuel for trucking driven by the heavy loads carried over long distances.
Transportation energy demand: Bridge to Lower 2°C
World – Quadrillion Btu
- The Outlook projects that by 2050, plug-in hybrids, battery electric and fuel cells will grow to about 44% of the fleet (920 million) and more than 50% of new car sales, driven by decreasing battery costs, policies to reduce tailpipe emissions, efficiency improvements, and reduced energy dependence for oil-importing countries.
- The need for energy-dense fuels makes commercial transportation harder to electrify. The annual growth rate from 2021 to 2050 of electricity across transportation in the Outlook is comparable to the annual growth within the IPCC Lower 2°C scenarios over a similar interval.
- Oil demand is lower in the IPCC scenarios, reflecting assumptions for fuel switching and increased vehicle efficiency. Assuming the underlying transportation activity is similar to the Outlook, the fuel efficiency in the average of the IPCC Lower 2°C scenarios would be roughly 30% higher in 2050.
- Biofuels can play a key role, particularly in harder to decarbonize sectors such as air and marine transportation, which would require substantial scale-up of biomass feedstock production and conversion of refineries to bio-refineries. In 2050, both the Outlook and the average of the Lower 2°C scenarios have biofuels accounting for 11-12% of the total transportation energy demand. With its higher overall demand for transportation, this means the Outlook would require about four times today's biofuels demand, compared to the average IPCC's projection of about three times
- Hydrogen, or hydrogen-based fuels such as ammonia, could also become part of the solution set for transportation with substantial scale-up of hydrogen.
Residential and commercial buildings
As populations grow and prosperity rises, more energy will be needed to power homes, offices, schools, shopping centers, hospitals, etc. This sector also includes the energy required for grocery stores, retail shops, sporting facilities and cultural centers, to name a few.
Buildings energy demand is projected to rise by around 15% through 2050. Led by the growing economies of developing nations, average worldwide household electricity use will rise about 75% between 2021 and 2050.
Energy efficiency plays a big role in constraining energy demand growth within the residential and commercial sectors as modern appliances, advanced materials and policies shape the future.
Demand shifts to developing countries with growth primarily supplied by electricity
- Rising prosperity and expanding commercial activity leads to an increase of about 15% in energy demand.
- Strong middle-class growth in developing nations increases energy demand by about 35%. Improving building efficiencies reduce energy demand in developed countries by about 15% by 2050.
- Globally, electricity demand rises by 1.8% per year, growing to almost 50% of this sector by 2050, as traditional biomass, coal and oil demand decline
Almost half of the world’s energy use is dedicated to industrial activity
As the global middle class continues to grow, demand for durable products, appliances and consumable goods will increase. Making these products and their components will take more industrial activity and more energy.
Industry grows in emerging markets, like India, Southeast Asia, the Middle East and Africa. Industry also evolves in developed nations as businesses and consumers strive to reduce their environmental impact by using energy more efficiently.
Industrial growth takes energy. It also takes innovation. This Outlook anticipates technology advances, as well as the increasing shift toward cleaner forms of energy such as electricity and natural gas. The industry of the future will do more with less energy and emissions than it does today.
Historical perspective on industrial product demand
Industrial product demand - growth indexed to 1990
Demand for industrial products has seen enormous growth in recent decades. Efficiency gains have kept energy demand from rising as fast as production, and the resulting emissions per unit of primary energy used (excluding emissions associated with the electricity used) have stayed fairly flat.
This growing product demand trend is expected to continue as more of the world’s people advance to the middle class and gain access to products essential for modern living. Addressing CO2 emissions coming from the energy use in industry will be key. Switching to lower-carbon fuels such as natural gas and hydrogen will be crucial, as will growing use of electrification and CCS.
- Plastics are used for food preservation, in medical supplies, cleaning products, electric vehicles, and many household goods.
- Cement is needed to build dams (hydropower), energy-efficient buildings and more.
- Aluminum is used in power grids, construction and vehicles.
- Steel is used for large-scale construction, shipping containers, trains and ships.
Industrial sector energy supports economic progress
Industrial sector energy supports economic progress
Global industrial energy demand – Quadrillion Btu
Heavy industry transitions toward cleaner fuels
2021 - 2050 growth – Quadrillion Btu
- The industrial sector provides about a billion jobs for people who work to feed, clothe, shelter and improve the lives of people around the world.
- Rising population and prosperity trigger demand for modern cities, medical equipment, mobility and home appliances that underpin the need for steel, cement and chemicals.
- In 2021, the industrial sector used about half the world’s electricity and nearly as much primary energy as the transportation and residential/commercial sectors combined.
- Increased options for consumers to ‘reduce, reuse, recycle’ and manufacturers’ efforts to improve industrial processes and efficiency can conserve fuel and mitigate emissions.
- Heavy industry (steel, cement, metals and manufacturing) and chemicals (plastics, fertilizer and other chemical products) are expected to account for nearly all of the growth to 2050.
Oil, gas and electricity fuel industrial growth
World – Quadrillion Btu
- Industry uses energy products both as a fuel and as a feedstock for chemicals, asphalt, lubricants, waxes and other specialty products.
- Shifting to lower-carbon fuels reduces the industrial sector’s 2050 direct emissions by around 25% versus 2021 even as primary energy demand increases by more than 10%.
- Oil, natural gas and electricity contribute almost all the energy needed to replace coal and meet the industrial energy growth to 2050.
- Oil grows because it is particularly well suited as a feedstock; companies choose natural gas and electricity for their versatility, convenience and lower direct emissions.
- Coal use declines as nations and businesses strive to reduce their environmental impact; it is expected to keep playing a role in steel and cement manufacturing.
Heavy industry energy intensity improves
Industrial sector energy intensity – Thousand Btu per dollar of GDP (2015$)
- Heavy industry energy intensity measures the amount of energy used in heavy industry and manufacturing per dollar of overall economic activity (GDP).
- Producing more value with less energy has a positive impact – economically and environmentally – for manufacturing companies and countries.
- Developed nations have lower energy intensity due to their service-based economies and predominance of higher-value, energy-efficient industries.
- China's energy intensity, which spiked as it invested in infrastructure and heavy industry, has been improving rapidly as its economy matures and efficiency increases.
- Optimizing energy use via advances in technology, processes and logistics can help companies remain competitive and contribute to gains in global energy intensity.
Consumer demand boosts need for chemicals
Feed and energy growth – Quadrillion Btu
- Chemicals are the building blocks for thousands of products that people rely on every day. Demand for fertilizer, cosmetics, textiles and plastics grows through 2050 as rising living standards enable people to buy more medical devices, food, cars, computers and home goods.
- Asia Pacific’s chemicals production grows to meet the needs of its rising middle class.
- Producers in the United States and Middle East chemicals production tap abundant, affordable energy supplies (used as feedstock and fuel) to gain competitive advantage.
- Europe, Russia, South Korea and Japan remain important contributors to global chemicals production.
Chemicals production relies on oil and natural gas
World – Quadrillion Btu
- The chemical industry uses hydrocarbon products as both a feedstock and a fuel.
- Naphtha and natural gas liquids are primarily used as feedstock; natural gas is used as both a feedstock (notably for fertilizer) and a fuel.
- Natural gas liquids use grows by around 40% from 2021 to 2050, as unconventional oil and natural gas production in the U.S. expands supply.
- Naphtha is expected to remain the dominant feedstock in Asia; the Middle East is expected to rely on natural gas liquids and natural gas.
- Advances in plastic materials and chemical processes can save energy as the industry continues to meet rising consumer demand for high-performing products.
Industrial energy demand excluding feedstocks
World – Quadrillion Btu
- Transforming and decarbonizing the manufacturing industry will be challenging. It’s large and complex, and it takes large amounts of heat to make basic materials such as cement and steel.
- Our projections indicate more efforts will be required to further decarbonize the industry to reduce emissions to the level of the IPCC Lower 2°C scenarios.
- Switching from coal to lower-carbon fuels is a theme in both the Outlook and the IPCC Lower 2°C scenarios. Natural gas and hydrogen are well placed to reduce the emissions from coal use.
- Electrification will need to be made available for even higher-temperature industrial processes, requiring further research into the materials used for equipment that can accommodate these new production techniques.
- Carbon capture and storage can provide a scalable solution to capture the emissions of both energy use and processing, for example from cement production. Large industrial clusters could benefit from combining captured CO2 streams to increase the efficiency of the storage.
Electricity and power generation
Global electricity demand rises more than 80%
Electricity demand is expected to grow around the globe, supplied primarily by growth in wind, solar, natural gas-fired generation, and nuclear. Besides meeting residential, commercial, and industrial demand, the increase in electricity demand is also fueled by the growth of electric vehicles in light-duty transportation. Cost reductions in transportation batteries are being leveraged for other applications including larger-scale electricity storage.
Today, batteries represent a small share of installed capacity on the grid, and they are primarily used for short-duration storage. The increased production from weather-dependent wind and solar triggers more transmission build-out, more storage and more natural gas plants that provide rapid backup to address short-duration demand peaks. To maintain reliable and affordable electricity, the world will need new solutions deployable at commercial scale.
Electricity generation highlights regional diversity
Net delivered electricity – Thousands of terawatt-hours
- The mix of electricity generation varies geographically based on factors including technology costs, domestic resource availability and policy targets (for example, renewable portfolio standards for local generation).
- Much of the world continues to shift further toward lower-emission sources for electricity generation, led by wind and solar, natural gas and nuclear, based on local opportunities and policies.
- In 2021, coal-fired generation was the leading source of electricity (accounting for about 45% in developing countries). China’s coal-fired electricity is forecast to fall by more than a third through 2050, replaced primarily by a combination of wind, nuclear, natural gas, and solar.
- The share of electricity use in transportation is expected to grow from today’s low levels with increasing penetration of electric vehicles as a result of cheaper batteries and emissions/fuel economy targets.
Renewables and natural gas dominate growth
Global growth 2021-2050 – thousand TWh (net delivered)
Renewables penetration increases across all regions
Wind/Solar share of delivered electricity – % share of TWh
- Wind and solar generation grow the most to 2050, supported by technology cost reductions (particularly for solar) and policies targeting lower CO2 emissions.
- Natural gas grows both in and out of developed countries, where growth comes from coal-to-gas switching. 40% of the natural gas growth among developing nations occurs in gas-producing Middle East and Africa.
- Most new nuclear generation is built in China. Demand is projected to decline in developed countries as some phase out nuclear generation.
- Coal-fired generation drops from 45% to 20% share by 2050 in developing countries, and from 20% to 1% in developed nations as the world aims to reduce its emissions.
- Wind and solar grow across the globe, but penetration in 2050 varies based on natural resource quality and levels of policy support. Globally, wind and solar’s share of delivered electricity grows, from 10% in 2021 to 40% in 2050.
- In 2050, wind and solar are expected to deliver around 50% of electricity in Europe and North America, contributing to renewables policy goals.
- Renewables growth in Asia Pacific contributes to local air quality improvements and energy security goals.
- High penetration levels can incur additional costs to manage intermittency through flexible backup generation, transmission buildout and storage to ensure reliable electricity delivery.
Different policy or technology choices can impact gas demand
Global natural gas demand sensitivity – billion cubic feet per day
- Lower-cost wind and solar with efficient storage could increase share to 50% of power generation. At this higher solar and wind share, proportional reductions in both coal and natural gas would reduce global natural gas demand by about 60 billion cubic feet per day.
- Decline in coal-fired generation occurs predominantly in developed countries out to 2050. Switching 50% of the remaining coal to natural gas would increase natural gas demand by about 14%.
- The Outlook team monitors movements in technology, markets, and policy to identify signposts making certain outcomes more or less likely.
Power Generation: Bridge to Lower 2°C
World - Quadrillion Btu
- Given the high degree of electrification of end-use across the IPCC Lower 2°C scenarios by 2050, these scenarios on average require about twice the energy input to produce the required electricity versus today.
- To attain the level of renewables envisioned in the scenarios will require much faster deployment of solar and wind. Solar would be required to deploy at six times the recent historic rate over the next three decades, and wind at about four times the recent rate. The Outlook assumes solar and wind will be deployed at about twice the historic rate, considering available policy support and reduced effectiveness areas with lower resource quality.
- Nuclear increases its contribution to power generation in the IPCC scenarios, to a level 35% higher than the Outlook assumes by 2050.
- The Outlook forecasts a 30% decline in electricity supplied by coal from 2021 levels; the IPCC scenarios call for a reduction of more than 80%.
- The role of natural gas would expand by almost 60% in the Outlook projection. In the IPCC scenarios, it falls by 15%.
Energy is essential for human progress. Economic expansion and improving access to energy enable longer, more productive lives for the growing global population.
Global Outlook Report • Aug. 28, 2023
Energy – in all its forms – enables growth and prosperity. As economies grow, as technology advances, as consumers become more environmentally aware, and as policies adapt, global energy demand will evolve to meet changing needs.
Global Outlook Report • Aug. 28, 2023