ExxonMobil focused particularly on three groups of countries in projecting future energy trends:

• China and India, which are expected to account for half the growth in global energy demand because these two developing economies will lead the world in terms of population size and the pace of growth in standards of living.

• A group of 10 Key Growth countries is expected to represent an increasingly significant share of the global energy market due to their rising populations and living standards. This geographically diverse group comprises Brazil and Mexico in the Americas; South Africa and Nigeria in Africa; Egypt and Turkey in North Africa/Mediterranean; Saudi Arabia and Iran in the Middle East; as well as Thailand and Indonesia in Asia.

• The OECD represents the developed economies. Of the 34 member countries in the OECD, two (Mexico and Turkey) are included in the Key Growth category because their energy and economic growth more closely mirror that of the developing economies. ExxonMobil uses OECD32 to signify the remaining developed economies that continue to show income growth but have relatively modest changes in energy demand.

Overview. ExxonMobil’s Outlook for Energy projects that carbon-based fuels will continue to meet about three quarters of global energy needs through 2040—a finding consistent with many projections, including those made by the International Energy Agency. The outlook shows a shift toward lower-carbon fuels in the coming decades that, in combination with efficiency gains, will lead to a gradual decline in energy-related carbon dioxide emissions.

Progress on curbing carbon dioxide emissions through 2040 will be led by OECD nations as energy demand declines and a shift to lower-carbon fuels occurs. Energy-related carbon dioxide emissions in those countries are projected to be about 10% below 1980 levels, even though they will have about 40% more people and significantly larger economies.

Across OECD nations, the Outlook assumes the implied cost of policies to reduce greenhouse gas emissions will reach about $80 per tonne in 2040.

Wind, solar and biofuels are expected to be the fastest-growing energy sources, increasing about 6% a year on average through 2040, when they will be approaching 4% of global energy demand. Renewables in total will account for about 15% of energy demand in 2040. Nuclear energy, one of the fastest-growing energy sources, is expected to nearly double from 2010 to 2040, with growth in the Asia Pacific region, led by China, accounting for about 75% of the increase.

The global middle class is expected to climb from about 2 billion in 2010 to almost 5 billion people by 2030, representing more than half of the world’s population, according to the Brookings Institution. As projected, that middle class expansion—largely in India and China—will be the largest in history and will have a profound impact on energy demand. Along with income gains, on-going societal changes such as expanded infrastructure, electrification and urbanization will contribute to greater energy use.

The Outlook for Energy identifies a significant evolution in the trade of oil and other liquids. A major shift is seen as North America will likely become a net exporter of liquids by 2020 as supplies of tight oil, natural gas liquids and bitumen from oil sands increase. This is expected to open new trading opportunities as Asia Pacific’s net imports are projected to rise by nearly 80% by 2040. Africa’s liquids exports are expected to decline as local demand more than doubles. In Latin America, growth in supplies is anticipated to outpace demand as supplies of deepwater and unconventional liquids expand.

North America unconventional gas production will nearly triple by 2040 and the region is expected to surpass the combined output of Russia and the Caspian region as the largest gas-producing area. In Asia Pacific, gas production is seen doubling by 2040, driven partly by unconventional production technologies. Demand in the region is expected to climb by about 170%, according to the outlook, and as a result, Asia Pacific will likely overtake Europe as the world’s largest gas importer.

Natural gas is expected to be the fastest-growing major fuel source during the outlook period as demand increases by about 65%. Half of that increase will come from the Asia Pacific region, led by China. Utilities and industrial operations are expected to account for about 80% of the demand increase worldwide, as operators increasingly choose natural gas because of its lower emissions and versatility as a fuel and feedstock. By 2040, natural gas is expected to account for more than a quarter of global energy use, surpassing coal in the overall mix.

Demand for coal is expected to rise through 2025 and then decline as China’s economic growth gradually slows and it follows the shift seen in Organisation for Economic Co-operation and Development (OECD) countries toward cleaner fuels. Still, over time, global coal demand is expected to remain most prominent in Asia Pacific, primarily to support growing power-generation requirements.

Other key findings of the outlook include:

• Non-OECD countries will represent 70% of global energy demand by 2040, but energy demand per person in these nations will remain well below OECD levels.

• Energy required to meet rising electricity demand will account for about half of total demand growth.

• Technologies that unlock new unconventional oil and gas supplies will help enable oil and natural gas to meet about 65% of global energy demand growth.

• Oil is expected to remain the Nº 1 energy source and demand will increase by nearly 30%, driven by expanding needs for transportation and chemicals.

• By 2040, abundant sources other than conventional crude and condensate will account for about 45% of global liquids production, compared with less than 25% in 2010. Remarkably, estimates of remaining recoverable crude and condensate relative to current demand have risen from about 60 years in 1981 to about 150 years as of 2013.

• Rising natural gas demand will be met with abundant new supplies and significant expansion in trade as unconventional gas production nearly quadruples and LNG trade triples by 2040.

Transportation in general. The Outlook projects global energy demand for transportation to rise by 40% from 2010 to 2040. Again, these energy needs will vary significantly by country.

• The Outlook projects that from 2010 to 2040, transportation energy needs in OECD32 countries will fall about 10%, while in the rest of the world these needs are expected to double. China and India will together account for about half of the global increase.

• Commercial transportation—heavy-duty vehicles, marine, aviation and rail—drives the growth in energy for transportation in every region. As global GDP increases about 140% from 2010 to 2040, energy needs in these four subsectors are likely to grow about 70%. As a result, the amount of fuel required to support a unit of economic output is projected to decline 30% from 2010 to 2040, or more than three times faster than the rate of improvement from 1980 to 2010.

• The number of light-duty vehicles in the world is expected to more than double, from approximately 825 million in 2010 to about 1.7 billion in 2040. However, energy demand for cars and other personal vehicles is expected to rise only slightly from 2010 to 2040, as fuel economy improvements in passenger cars over time essentially offset a steep rise in the number of cars in the world.

• Improved transportation efficiencies will help curb global liquids (petroleum products and biofuels) demand growth in 2040 by about 35 MBDOE. In addition, another 5 MBDOE will be saved as consumers switch to other fuel sources such as natural gas. This combined 40 MBDOE in avoided liquids demand represents a significant amount of fuel. It is a little less than half the approximately 89 MBDOE of total liquids used in the world in 2010. The biggest contributions to savings will come from personal and commercial road vehicles, which each account for about 40 percent of the 40 MBDOE expected to be saved in 2040.

• About 85% of the growth in the global fleet through 2040 will likely come from countries outside the OECD32, where per capita income is likely to be more than two and a half times the 2010 level. China alone is expected to account for about 40% of the global fleet increase.

• By 2040, China’s light-duty vehicle fleet is expected to be about 400 million—40%t bigger than the US fleet. In 2010 it was only 60 million. The main reasons are rising incomes and an expanding middle class.

Fuel efficiency. The Outlook projects that the fuel economy of the average vehicle on the world’s roads will be 45 mpg (5.22 l/100 km) in 2040, compared to about 25 mpg (9.4 l/100 km) in 2010. A significant contributor to this increased efficiency will be improvements in “conventional” gasoline and diesel engines.

Projected sales of light-duty vehicles by type. Source: ExxonMobil Outlook. Click to enlarge.

The Outlook sees hybrid vehicles growing from 1% of new-car sales in 2010 to close to 50% of sales by 2040, making up about one-third of the global fleet at that time. This is significant because hybrid cars can provide about a 30% fuel economy benefit compared to conventional gasoline cars and are expected to become cost-competitive by 2025.

On the other hand, plug-in hybrid and full electric cars are likely continue to make modest gains, but penetration will remain very low due to their high cost and functional constraints compared to alternatives, according to the report. Even though battery costs are likely to fall in coming decades, electric vehicles will continue to face significant challenges as other alternatives also improve; the Outlook sees electric vehicles accounting for only about 5% of the global fleet in 2040.

We project that energy needs for light-duty vehicles will increase by only about 10 percent from 2010 to 2025, after which demand will likely decline about 5 percent to 2040. This flattening of demand will be a significant accomplishment, especially considering that the global vehicle fleet is projected to double during that time period.

—Outlook