ExxonMobil Energy Outlook Presentation

Scott Nauman, corporate planning manager at ExxonMobil, presented "The Outlook for Energy: A View to 2030" in an event co-sponsored by the Global Energy Initiative and the Canada Institute. The report, which is also used by corporate executives as the basis for strategic planning, lays out the company's predictions for energy supply and demand over the next 25 years and provides a summary of the last quarter century as well.

The outlook assumes that demand for energy is a direct byproduct of economic growth, that balancing supply and demand is essential, and that efficiency improvements will be important. Some of the most pressing conclusions of the presentation are:
• CO2 emissions, which will likely rise steadily, are very troublesome;
• Newer and cleaner technologies will require cost-of-carbon measures to come to market, as companies such as ExxonMobil will continue to meet demand in the most cost-effective way;
• While renewable energy will gain a percentage of the market, it will remain a low portion of all energy use, even by optimistic calculations;
• Developing countries will increase energy use more than developed countries, so their efforts to reduce carbon emissions are important;
• Global participation and massive investment will be required if we aim to lower annual carbon emissions in any significant way.

In 2005, world energy use was 230 million barrels of "oil equivalent" per day (MBDOE), a figure that is expected to rise by 40 percent to 325 MBDOE in 2030, even with gains in efficiency. Oil, gas, and coal comprise 80 percent of today's total, which led Nauman to conclude that the "world will largely run on fossil fuels 20 years from now, just as it does today."

A huge portion of global energy use is power generation. Currently, 20 percent of the world's population is using 60 percent of the electricity—a significant global imbalance.

Right now, coal is the least expensive way to generate power in the United States and accounts for half of current U.S. power generation. If the government implements a cost-of-carbon system (tax, emissions trading system, etc.) similar to that of Europe, setting a cost at about $30 per metric ton of CO2, coal will become more expensive than both natural gas and nuclear energy. Unfortunately, even with such a measure, carbon capture and sequestration will fail to be economically viable. In general, coal use will decrease only if there are financial incentives making it less economically attractive.

Moving on to transportation, Nauman explained that commercial transport is actually a bigger and faster-growing use of energy than personal or "light duty" vehicles. ExxonMobil expects light duty fuel demand to begin to fall around 2012 and continue to fall until 2030 for two reasons. First, in the United States today, there are 782 vehicles per 1,000 people—which demonstrates a saturation rate. Second, based on fuel efficiency gains of about 1.3 percent per year since 1980, the company predicts an average improvement in new vehicle fuel economy of about 2 percent per year until 2030.

Global oil demand will continue to rise, however, at an average rate of 1.2 percent per year until 2030, mainly due to other forms of transportation (heavy duty, aviation, marine, rail). Currently, the world uses 40,000 gallons of fuel every second. Nauman claimed that the increase from 86 MBDOE used in 2005 to the predicted 116 MBDOE in 2030 will not face a resource constraint, but could encounter possible geo-political constraints.

Finally, the presentation addressed the direct link between increasing energy use and carbon dioxide emissions. Between now and 2030, the world will face an increase in CO2 emissions of about 1.2 percent average growth per year—meaning that the annual human contribution to CO2 levels will reach 37 billion metric tons. Importantly, this estimate already assumes a large improvement in energy efficiency and an increased reliance on nuclear energy.

The gravest prediction yet is that the global economy, and thus energy demand, will grow so much over the next 20 years that even with aggressive and unlikely measures to improve efficiency, the amount of CO2 released from human activities in 2030 will be much higher than the amount emitted in 2005.

No foreseeable technology or policy can change the fact that annual energy use and carbon emissions will increase. But, with a dramatic worldwide effort and huge levels of investment, the human impact on carbon levels in future years can begin to decline.

Drafted by Jacqueline Nader