Energy demand: Three drivers
Policy. Technology. Consumer preferences. All three impact how the world uses energy. Each driver influences the other. The interplay between these can vary 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.
Energy demand: Three drivers
Three drivers of energy demand
Deploying new technology enables people to do more with less. Most successful technologies often have the supporting policy and commercial frameworks to achieve scale. A policy, like tax incentives, can spur development of new technology, but these technologies ultimately need 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.
Sound government policy 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 because it is hard to mandate something that consumers believe is inferior to current options.
Demand for energy 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 incentivize choices, like a carbon tax that encourages lower emissions electricity supply.
Global energy demand by sector
Primary energy – quadrillion BTUs
- Global demand reaches about 660 quadrillion BTU in 2050, up ~15% versus 2019, reflecting a growing population and rising prosperity.
- Residential and commercial primary energy demand declines by ~10% to 2050 as efficiency improvements offset the energy needs of a growing population.
- Electricity generation is the largest and among the fastest-growing sector, driven mainly by expanding access to reliable electricity in developing countries. Growing electrification is offset by efficiency improvement in the developed countries.
- Industrial sector growth supports construction of buildings and infrastructure, and manufacturing of products that meet the needs of the world’s population.
- Commercial transportation grows as expanding economies increase the need for movement of 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 ~70% in 2050.
- Developing countries account for more than 100% of the global energy demand growth.
Efficiency gains outpace economic growth in the OECD, which helps offset energy demand increases historically linked to economic expansion.
- The combined share of energy used in the U.S. and European OECD nations declines from about 30% in 2019 to about 20% in 2050.
Energy demand led by non-OECD
Primary energy – quadrillion BTUs
- 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 ~70 percent in 2040
- China and India contribute ~50 percent of the world’s energy demand growth to 2040
- Efficiency gains outpace economic growth in the OECD, which helps offset energy demand increases historically linked to economic expansion
- The combined share of energy used in the United States and European OECD nations declines from about 30 percent in 2017 to less than 25 percent in 2040
Global energy mix shifts to lower-carbon fuels
- Oil continues to play a leading role in the world’s energy mix, with growing demand driven by commercial transportation and feedstocks for the chemicals industry.
- Natural gas grows the most of any energy type, reaching almost 30% of all demand.
- Renewables and nuclear see strong growth, contributing around 55% of incremental energy supplies to meet demand growth.
- Coal use remains significant in parts of the developing world, but drops below 15% global share as China and OECD nations transition 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.
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Commerce and trade drive transportation energy consumption up almost 25% by 2050.
Over the past few decades the movement of people and goods has grown dramatically, driven by vast growth in the purchasing power of individuals. Likewise, technology advancements have provided new and more efficient mobility options.
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. The majority of the growth comes from heavy-duty trucking as a result of goods movement, but 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, like electric vehicles (BEV and PHEV).
In this Outlook, hypothetical sensitivities for light-duty demand showed that if by 2035 100% of all new car sales were Electric Vehicles instead of 20%, liquids demand could fall to 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.
Transportation energy demand growth driven by commerce
Global sector demand – million oil-equivalent barrels per day (MBDOE)
- Global transportation-related energy demand is expected to grow by almost 25% from 2019 to 2050.
- Personal vehicle ownership continues to grow as purchasing power rises; higher efficiency and more electric vehicles lead to a peak and 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 annual growth rate at 1.8% from 2019 to 2050 due to rising economic activity as well as rapid growth of the middle class, specifically in emerging economies.
Access to personal mobility increases
- When individual purchasing power increases, access to personal mobility also increases, driving growth of the global fleet of light-duty vehicles and motorcycles
- Motorcycles offer a lower-cost entry point to personal mobility, with ownership and growth particularly high in Asia Pacific
- Increasing access to vehicles drives a worldwide increase in personal mobility-related energy demand growth, with Asia Pacific leading the growth
- In the OECD (such as U.S. and Europe), while the number of cars per 1,000 people increases by about 10 percent, passenger vehicle fuel demand declines about 30 percent on average as a result of efficiency gains and powertrain diversification
Light-duty fleet by type
Light-duty demand by fuel
- 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 non-OECD countries.
- In the OECD, while the number of cars per 1,000 people increases, the associated vehicle fuel demand declines by almost 45% by 2050.
- In 2019, the global fleet was about 1.2 billion vehicles, with ~7 million (0.6%) of the fleet being plug-in hybrids, battery electric, or fuel cell.
- By 2050, these advanced vehicles grow to ~40% of the fleet (~835 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.
- Light-duty vehicle demand for internal combustion engine (ICE) fuels is projected to peak around 2025 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.
Global transportation energy demand relative to GDP
- Historically, commercial transportation services (e.g. ton-miles of freight,passenger-miles of air travel) demand growth tracks with GDP and economic growth
- As GDP continues to grow, especially in developing nations, there will be increased demand for goods and services
- Recent accelerated decoupling of the trends for GDP and commercial transportation demand has been observed and is expected to continue as a result of fuel switching and efficiency improvements (e.g., mode shifting, engine improvements or logistical improvements)
- Continued improvements in efficiency will moderate commercial transportation energy demand associated with expanding economic activity.
Commercial transportation grows in all aspects
Commercial transportation energy demand – MBDOE
- Commercial transportation rises in all regions, with more than 80% of the growth in the non-OECD 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 2019 to 2050, with heavy-duty transportation growing the most and air transportation growing the fastest.
- Electrification plays a role in certain applications (for example, short-haul trucks and buses), but is less suitable in heavy long-haul, and is unlikely to play a substantial role in international marine, and aviation that require higher energy storage to meet range requirements.
- Hydrogen is expected to make inroads into commercial transportation as technology improves to lower its cost 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.
Heavy-duty landscapeHeavy-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 versus a heavy commercial vehicle (HCV) for cross-country shipments of goods. Additionally truck fleets can be quite different from region to region based on the distribution of various sector and economic needs, such as heavy industry, manufacturing or resource extraction.
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 ~15% of the fleet, but used ~55% of the fuel for trucking driven by the heavy loads carried over long distances.
We use sensitivity analyses to provide greater perspective on how changes to our base Outlook assumptions could affect the energy landscape. Our hypothetical sensitivities explore different fuel efficiency trends in a higher demand case as well as deep penetration of alternatives, such as electricity, biofuels, gas and hydrogen in a lower demand case.
Heavy-duty fuels demand sensitivities
World – MBDOE
Liquids demand sensitivities by sector
World – MBDOE
- The 2019 Outlook assumes that future efficiency improves on average at double the historical rate from 2000 - 2016, and that alternative fuels grow to ~13% of demand
- In comparison, the high demand sensitivity above assumes future efficiency improves only at the historical rate, which could increase demand ~30% versus the 2019 Outlook, and highlights the need for continued technology investments in efficiency improvements.
- The low demand sensitivity assumes a deeper penetration of alternative fuels with accompanying efficiency gains. The penetration assumptions vary by truck type and usages. LCVs see nearly 100% penetration of Electric Vehicles due to shorter, start/stop routes, MCVs see 70% alternative fuels, and HCVs see ~20% alternatives, mostly biofuels due to the need for high energy density fuels in long-haul trucks. This sensitivity would require a rapid acceleration in the early 2020s of both alternate fuels into the heavy-duty fleet as well as infrastructure build-out to support the alternatives. The resulting fuel penetration is approximately three times the 2019 Outlook in 2040, with traditional fuel demand peaking prior to 2025 before declining to mid-2000s levels.
- The impact on total liquids demand from the high sensitivity shows liquids demand could be ~7% above the 2019 Outlook, while in the low demand sensitivity total liquids demand could peak in the mid-2030s as growth in chemicals, aviation and marine are offset by the heavy-duty decline.
- These hypothetical sensitivities highlight the difficulty of decarbonizing heavy-duty transportation and the need for further technology development on economic, lower-emission solutions.
Demand shifts to non-OECD with growth primarily supplied by electricity
- In addition to the energy people need to heat or cool their homes and keep appliances running, this sector also includes the energy required in hospitals, schools, grocery stores, retail shops, offices, sports facilities and cultural centers.
- With rising prosperity and expanding commercial activity comes an increased demand for lighting, heating, cooling and power in homes and offices of more than 15% by 2050.
- Strong middle-class growth in non-OECD nations increases energy demand by almost 40%. Improving building efficiencies reduce energy demand in OECD countries by almost 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.
Household electricity up in non-OECD
Residential electricity intensity
- Residential electricity use is expected to rise about two-thirds by 2040 as a substantially increased middle class seeks to improve health, security and comfort at home
- The annual electricity use per household in non-OECD countries rises about 60 percent with residential electricity use in India and China expected to grow strongly, bringing electricity consumption per household close to the European average by 2040
- Electricity use per household in OECD nations will be stagnant or declining as more efficient appliances help limit electricity requirements
Residential energy fuel use varies across regions
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. Without exception, industrial activities are required to manufacture these products and their components. Industrial activities, such as textile manufacture, car assembly or creation of construction materials, take place in almost all regions, and for all this activity energy is required.
Industry grows in emerging markets, like India, Southeast Asia, the Middle East and Africa. Industry also evolves in OECD 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 sources of energy such as electricity and natural gas. The industry of the future will be more energy efficient and less carbon intensive than it is today.
Industrial sector energy supports economic progress
World – quadrillion BTUs
- The industrial sector provides more than 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 2019, 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 BTUs
- Industry uses energy products both as a fuel and as a feedstock for chemicals, asphalt lubricants, waxes and other specialty products.
- 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.
- Shifting to lower-carbon fuels reduces the industrial sector’s 2050 direct emissions by 15% versus 2019 even as primary energy demand increases by 10%.
Heavy industry energy intensity improves
Thousand BTUs per dollar of GDP
- 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.
- OECD nations have lower energy intensity thanks to their service-based economies and predominance of higher-value, energy-efficient industries.
- China's 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.
Heavy industry transitions toward cleaner fuels
2019-2050 change in quadrillion BTUs
- Manufacturing tends to gravitate toward regions with access to abundant, affordable energy, an able workforce and balanced policies
- Each region’s fuel mix differs based upon its unique blend of manufacturing activity and the relative availability and cost of its energy sources
- Electricity use is expected to grow; it is ideal for motors, robotics and process controls
- Natural gas is expected to give a competitive edge to resource-rich areas of Africa, the Middle East and Latin America; it also helps China manage its air quality
- Coal’s use declines in the OECD and China but doubles in coal-producing India and the rest of Asia because of coal’s abundance and affordability relative to other fuels
Consumer demand boosts chemicals energy growth
- 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 people’s rising living standards enable them 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 U.S. 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 BTUs
- 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 more than 80% from 2019 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.
Electricity and power generation
Global electricity demand rises more than 70%
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 are used for short-duration storage. The increased variable production from weather-dependent wind and solar triggers additional transmission build-out, storage and flexible gas peaking generation but results in reduced asset efficiency. Further breakthroughs that provide new solutions deployable at commercial scale to maintain reliable and affordable electricity for consumers are needed.
Electricity generation highlights regional diversity
Net delivered electricity – thousand TWh
- 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 to lower-emission sources for electricity generation, led by wind and solar, natural gas and nuclear, based on local opportunities and policies.
- In 2019, coal-fired generation was the leading source of electricity (accounting for more than 45% in developing countries). China’s coal-fired electricity is forecast to fall by almost half 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 emissions/fuel economy targets and cheaper batteries.
Renewables and natural gas dominate growth
Global growth 2019-2050 – thousand TWh (net delivered)
- 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 the OECD countries. OECD growth comes from coal-to-gas switching, and half of the non-OECD growth is in gas-producing Middle East and Africa.
- A majority of new nuclear generation is built in China. OECD demand is projected to decline as some countries phase out nuclear generation.
- Coal-fired generation drops from 45% to 20% share by 2050 in the non-OECD countries, and from 20% to 2% in the OECD 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 6% in 2019 to almost 35% in 2050.
- In 2050, wind and solar are expected to deliver around 40% or more 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.
- Up to 20-30% wind and solar penetration can be achieved without significant additional costs to the power grid. Higher penetration levels incur additional costs to manage intermittency through flexible backup generation, transmission buildout and storage to ensure reliable electricity delivery.
Renewables penetration increases across all regions
Wind/Solar share of delivered electricity – % share of TWh
- Wind and solar grow across the globe, but penetration in 2040 varies based on natural resource quality and varying levels of policy support. Globally, wind and solar’s share of delivered electricity grows significantly from about 6 percent in 2017 to about 20 percent in 2040
- In 2040, wind and solar are expected to deliver 25 percent or more 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
- Up to 20-30 percent wind and solar penetration can be achieved without significant additional costs to the power grid. Higher penetration levels incur additional costs to manage intermittency through flexible backup generation, transmission build-out and storage to ensure reliable electricity delivery
ConsiderationsWind and solar are potential solutions for lower-emission power generation, but the quality of resources varies geographically, even within national borders. These resources are also not always located near high population areas demanding electricity, requiring additional transmission and distribution infrastructure. Technology choices used in power generation can be compared by looking at the cost plus return on capital to generate a unit of electricity, known as the levelized cost of energy (LCOE). This cost is impacted by factors including the cost for the equipment, maintenance, fuel, financing terms and tax incentives. As shown below, resource quality variation can lead to a 2-3 fold increase in cost due to location. Assessing the optimum mix of power generation technologies is a local evaluation because cost factors and policies can vary greatly between sites even within a country.
Natural gas sensitivity
Similar to the transportation sector, we use sensitivity analyses to provide greater perspective on how changes to our base Outlook assumptions in the power generation sector could affect the energy landscape.
Power generation modeling is complex with a number of questions to explore for both demand growth and supply mix, including:
- How will electricity access expand in developing nations?
- How will technology evolve to enable more electricity use in other sectors (e.g., EVs for personal mobility instead of gasoline-fueled cars or mass transit)?
- How will developing nations transition off coal if it is their lowest cost supply today?
- Will perceptions about nuclear safety challenge new builds in some countries?
- What is the optimum penetration of variable renewables before intermittency challenges create reliability and cost impacts for power grids?
There are a number of different potential outcomes for each of these questions that could yield different projections. The top chart shows outcomes for different third-party models,including some deep decarbonization scenarios like the IEA’s Sustainable Development Scenario (IEA SDS). These results describe a range of potential outcomes with some common trends:
- Electricity demand grows significantly from today to 2040
- Zero-carbon power generation grows 2-3x due to cost competitiveness and policies
- Gas use for electricity grows in all cases except the IEA SDS, accompanied with coal’s decline primarily in developed countries
The bottom chart is a sensitivity to test the impact of alternate assumptions on natural gas:
- Lower cost wind and solar with efficient storage to manage their inherently variable production could increase penetration to 50 percent of supply (more than 2x the base Outlook). Ratable reductions in both coal and natural gas by region could reduce global natural gas demand by ~115 BCFD
- Decline in coal-fired generation occurs predominantly in developed countries out to 2040. Switching 50 percent of the remaining coal to natural gas to address issues such as air quality and emissions could increase natural gas demand by over 20 percent
Monitoring technology advancements, market behavior and the evolving policy landscapes can identify signposts related to cost reduction, technology deployment and policy targets indicating how a different outcome may materialize.
Views of the electricity supply mix vary based on assumptions
Supply of electricity - Thousand TWh
Different policy or technology choices can impact gas demand
Global natural gas demand sensitivity – BCFD
How we develop our OutlookExxonMobil uses a data-driven approach to understand potential future energy demand and supply.
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Pursuing a 2°C pathwayMany uncertainties exist concerning the future of energy demand and supply, including potential actions that societies may take to address the risks of climate change.
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EmissionsProviding reliable, affordable energy to support prosperity and enhance living standards is coupled with the need to do so in ways that reduce impacts on the environment, including the risks of climate change. This is society’s dual challenge and ExxonMobil takes it seriously.
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Energy supplyEnergy – 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.
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Global fundamentalsEnergy is essential for society’s progress. Economic expansion and improving access to energy enable longer, more productive lives for the growing global population.
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