A significantly bigger global middle class, expanded emerging economies, and 2 billion more people will contribute to 35% higher world energy demand by 2040, ExxonMobil Corp. forecasts in its 2015 energy outlook.
The growth of the middle class worldwide will be significant, William M. Colton, ExxonMobil’s vice-president for corporate strategic planning, said during a Dec. 9 presentation of the forecast at the Center for Strategic and International Studies.
“People and progress drive energy demand,” Colton said. “People nearly everywhere in the world can see how other people are living. This creates expectations.”
Colton said benefits of modern technology and energy are self-evident, particularly to those who are only now beginning to gain access to them. “To help billions to reach the middle class and living standards to rise, the question remains how to expand modern technology and energy’s benefits while protecting the environment,” he said.
The forecast cited a Brookings Institute prediction that the global middle class will increase to nearly 5 billion people by 2030, representing almost half the world’s population, from about 2 billion in 2010.
That projected middle class expansion, largely in India and China, would be the largest in history and have a profound impact on energy demand, Colton said. Along with income gains, on-going societal changes such as expanded infrastructure, electrification, and urbanization could contribute to greater energy use, he said.
Different trajectories
ExxonMobil’s 2015 forecast anticipated varying energy demand growth trends around the world during the 30-year period as countries move along different trajectories, driven by population, demographics, economic growth, and income levels.
It said future demand growth trends can be traced by focusing on three groups:
• China and India together are expected to account for about half the growth because their developing economies are expected to lead the world in terms of population size and the pace of growth in living standards.
• A group of 10 “key growth” countries—Brazil, Mexico, Nigeria, South Africa, Egypt, Turkey, Saudi Arabia, Iran, Thailand, and Indonesia—is anticipated to represent an increasingly significant global energy market share due to their rising populations and living standards.
• Mexico and Turkey are members of the Organization for Economic Cooperation and Development, which represents developed countries, were included among the key growth countries because their energy and economic growth are closer to developing economies. The 32 other OECD members will likely continue to show income growth but have relatively modest energy demand changes, the forecast said.
Global energy demand is expected to rise more slowly than gross domestic product because of more efficiency across the board, Colton said. “It would be three times higher if you didn’t assume these efficiency measures,” he noted.
The number of cars will double with more people buying them as they move into the middle class, he said. “So will efficiency, driven by government mandates,” Colton said.
Amid the 35% global demand increase, crude oil will rise 30% and remain the No. 1 energy source, ExxonMobil said. Gas demand will rise at the quickest rate, 65%, with about half the increase coming from the Asia Pacific region, led by China.
Demand for coal is projected to rise through 2025 and then decline as China’s economic growth gradually slows down and it follows the OECD’s shift toward cleaner fuels. Still, over time, Asian Pacific coal demand is expected to remain strongest globally, primarily to support growing power generation requirements.
ExxonMobil projected 30% higher global petroleum liquid supplies by 2040. “The decline of conventional resources will require more development,” Colton said, adding that North America probably will become a net exporter by 2020 as supplies of tight oil, natural gas liquids, and bitumen from oil sands increase. This could open new trading opportunities as Asia Pacific net imports are projected to rise nearly 80% by 2040.
Biggest gas producer
The continent’s unconventional gas juggernaut could play a key part in sending North America past Russia and Caspian Basin countries as the biggest producing region, he said. “Asia Pacific will likely overtake Europe as the world’s largest gas importer,” Colton said.
“Through 2040, LNG trade is expected to more than triple to nearly 100 bcfd,” he said. “Most of the growth will serve existing demand in Europe and rapidly growing demand in Asia, with Latin America and Africa expected to see expanded LNG imports.” Interregional pipeline exports could double, with Asia Pacific joining Europe as a significant interregional pipeline importer.
North America’s transition to a net exporter could profoundly affect global trade, Colton said. “If energy is the world’s economic life blood, free trade is its circulatory system.”
Kenneth P. Cohen, ExxonMobil’s vice-president for public and government affairs who also participated in the CSIS briefing, said, “In this country, it’s no accident unconventional resource growth occurred largely due to aces to resources held by private landowners. It basically put North America 20 years ahead of the rest of the world.”
Technology’s contributions will continue to be substantial, ExxonMobil’s outlook said. “We’re probably being conservative in our outlook for unconventional resources’ production growth,” Colton said. “We build in improvements, but stayed tuned and keep watching.”
Contact Nick Snow at [email protected].