Today’s energy industry is driven by a multitude of factors. Most importantly, the world has recognized the scarcity of fossil fuels and the importance of focusing development on energy sources that are more sustainable, renewable, and efficient. However, three of the world’s largest energy companies, Exxon Mobil Corporation, BP, and Statoil, predict that oil and gas will continue to remain the most demanded energy sources well into the future. In fact, the three energy tycoons all similarly suggest that oil and gas will fuel the world’s economic growth as far into the future as 2040.
Each year, Platts, an energy research company, reports the 250 Top Energy Company Rankings. This system ranks the world’s largest energy companies based on individual companies’ assets, revenue, profits, and return on investment capital. According to the 2012 ranks, Exxon Mobil, BP, and Statoil all were among the world’s top 10 leaders in energy. Exxon Mobil retained the top spot in the Platt rankings, a spot it has held since 2007. BP ranked 4th on Platt’s 2012 rankings, moving all the way up from the 118th spot it held in 2011. Finally, Statoil was ranked 6th in the global energy company rankings, up five spots from its 2011 ranking of 11th.
According to Exxon Mobil’s “2012 The Outlook for Energy: A View to 2040”, the world’s energy demand is expected to increase 35% by 2040 even in the wake of increased energy use efficiency. This large increase projection is directly correlated to the anticipated world population growth from 7 billion today to nearly 9 billion by 2040.
Not surprisingly, Exxon Mobil suggests oil will remain the world’s top fuel. However, natural gas is expected to overtake coal as the world’s second leading fuel because of increased investment and technological advancements in the area of natural gas. Together, oil and gas are predicted to supply 60% of global demand by 2040. In addition, Exxon Mobil believes gas is the “energy of the future”, and expects global gas supplies to rise 65% by 2040.
The technological advancements that continue to push supplies of oil and gas are numerous. For example, Exxon Mobil points to the production of crude oil from deep water, oil sands, and tight oil resources as a major advancement. For gas, the company highlights the technological advancements allowing production from areas such as tight oil resources in North Dakota, deepwater developments in the Gulf of Mexico, and Canadian oil sands. Not until recently, these areas of production were unattainable because of technological limitations.
Even with the rise in demand, production, and use of crude oil, Exxon Mobil estimates that by 2040 more than half of the world’s total supply of those resources will have yet to be produced. Furthermore, it is estimated that there is enough natural gas left in the world to meet current demands for the next 200 or more years. Overall, the future vision appears to show a continued heavy reliance on conventional energy resources.
Turning to BP, the world’s 4th largest energy company predicts a similar future. According to the company’s annual “Energy Outlook 2030”, global energy demand for energy will see a steady increase of approximately 1.6% per year through 2030. Overall, we should expect a total demand increase of around 40% by 2030. Similar to Exxon Mobil, BP suggests that traditional fossil fuels will continue to dominate the market.
Unlike Exxon Mobil, BP forecasts that oil, while occupying the largest market share of energy, will see a demand increase of only .8% through 2030. In comparison, gas is expected to be the fastest growing fuel with demand increasing at an average of 2% per year through 2030.
Interestingly, BP attributes the growing energy demand to developing parts of the world such as China, India, and the Middle East. Like Exxon Mobil, BP points to an increase in supply growth in North America and specifically points to the U.S. tight oil and Canadian oil sands supplies. It is estimated that North America will account for nearly 73% of the world’s gas production in 2030.
In their annual “Energy Perspectives: Long-term macro and market outlook”, Statoil’s predictions through 2040 are in accord with Exxon Mobil and BP. The company predicts that global energy demand will increase by as much as 40% by 2040 with traditional fossil fuels dominating an estimated 72.5% of total market demand in 2040. Similar to other predictions, oil is expected to have the slowest growth at an average rate of .5% per year. Statoil bases the slow decline in oil demand growth to be due to factors including environmental policies, increasing prices, and energy efficiency in the transport sector. Furthermore, gas once again is considered the “energy of the future” and demand is expected to grow 60% by 2040.
Overall, the three industry leaders are consistent in two major areas. First, traditional fossils fuels will continue to dominate the world’s energy demand well into the future due in large part to technological advancements and investments. Second, the recent surge in natural gas production is not a fluke, but rather an industry that is expected to climb in demand faster than any other. And finally, all three major companies show very little promise by way of renewable energy. In fact, according to Statoil predictions, renewable energy will account for less than 20% of total energy production in 2040.
Although the outlook presented by Exxon Mobil, BP, and Statoil sounds promising economically, the fact still remains that the world continues to burn through fossils fuels at an increasingly faster pace than yesterday and does so without much of an outlook for renewable energy.
As the world continues to rely on traditional fuels, individual countries have taken steps to promote the use of renewable energy. For example, the United States adopted The Energy Policy Act of 2005, which provided tax credits for residential property that used certain forms of renewable energy. See 26 U.S.C. § 25d. Other countries have taken more direct approaches to enforce alternative energy development. For example, the European Union has recently implemented the EU Emissions Trading Scheme which places strict standards on domestic and international aircraft emissions in an attempt to promote energy efficiency and renewability. See NBAA.org, European Union Emissions Trading Scheme (ETS), http://www.nbaa.org/ops/environment/eu-ets/.
However, the forecasts of Exxon Mobil, BP, and Statoil indicate that the individual attempts by countries to promote alternative energy have had little impact on future demand. Instead, a more international approach to alternative and renewable energy development needs to be used. Some international organizations such as the International Renewable Energy Agency (IRENA) have recently been established and it is up to the nations of these agencies to collectively come together and change the future of renewable energy demand.
Exxon Mobil, in its annual report, properly quoted, “[w]hen it comes to energy – the future is not predetermined.” I believe the collection of these long term forecasts show just how important it is that more effort be put into renewable energy sources.