ExxonMobil forecasting long-term energy trends begins with a simple fact: people need energy. Over the next few decades, population and income growth – and an unprecedented expansion of the global middle class – are expected to create new demands for energy.
What will the world look like in 2040?
We see global energy consumption rising by about 35 percent from 2010 to 2040.
The world’s energy future is not just about growth. It also is about using energy far more efficiently – in everything from vehicles to buildings to industries; without efficiency gains we estimate global energy demand would grow not by 35 percent, but by 140 percent. The future will also be marked by a shift to lower-carbon fuels, a plateau in CO2 emissions and technologies that open up new energy options, such as unconventional oil and natural gas in North America.
Energy demand trends from 2010 to 2040 are expected to vary significantly around the world, as countries move along very different trajectories in terms of key demand drivers including population, demographics, economic growth and income levels.
In general, we can trace future energy trends by focusing on three groups:
- China and India together 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.
- At the same time, the OECD represents the developed economies. Of the 34 member countries in the OECD, we include two (Mexico and Turkey) in our Key Growth category because their energy and economic growth more closely mirror that of the developing economies. Therefore, we will use the OECD32 to signify the remaining developed economies that continue to show income growth but have relatively modest changes in energy demand.
When dozens of countries and billions of people move up the development ladder, as they are doing today, it has a direct impact on wealth creation and broader human progress in all countries and regions of the world.
Changing population and demographics
The global population is projected to rise to 9 billion in 2040, compared to about 7 billion in 2010. About 40 percent of this increase is expected to come from India and the 10 Key Growth countries. OECD32 nations are likely to see only modest population growth, as should China.
China’s population is expected to plateau around 2030, at 1.4 billion, enabling India to become the world’s most populous country, with an anticipated 1.6 billion people by 2040.
Economic growth is tied closely to demographics, in particular the number of working-age citizens (ages 15–64) as a percent of total population. As this share increases, there is more opportunity for economic growth, both in the aggregate sense and, more importantly, on a per capita basis. Good examples of this dynamic include post-World War II Japan and China since the 1980s.
Income and rising GDP
As the world population increases by an estimated 30 percent from 2010 to 2040, we see global GDP rising by about 140 percent. While all countries are likely to experience economic growth, some are expected to see very rapid expansion. The fastest growth is seen in China, India and the Key Growth economies.
A closer look at these trends reveals that what really drives a country’s energy demand is not just the size of its economy or its population, but rather the interaction of the two – the income level of its citizens.
A simple measure of personal income is GDP per capita. By 2040, per capita GDP in China is expected to be four times higher than it is in 2010. It is likely going to be three times higher in India, and 1-2 times higher in Key Growth economies. It’s worth emphasizing that these changes are not just about GDP statistics; they mean higher standards of living for billions of people.
Measured in absolute dollars of GDP per capita, many developing economies’ income levels should still be quite low compared with the OECD32 even by 2040. Nevertheless, this projected rise in income will result in a fast-growing middle class in many developing countries, significantly boosting energy demand.
Demand rising China, India and Key Growth countries
The Brookings Institution estimates 2.8 billion people will join the middle class between 2010 and 2030, and almost all of them will live in developing countries. China, India and Key Growth countries combined represent more than 80 percent of projected middle-class growth.
Likewise, we project that essentially all the growth in global energy demand through 2040 will come from developing countries, where energy consumption is seen increasing by nearly 70 percent. Of the projected growth in global energy demand, China, India and the Key Growth countries will account for 30, 20 and 30 percent, respectively.
This is not to suggest that nothing is happening in developed economies. In fact, what’s happening in the OECD32 is unprecedented: economies are still expanding, but energy consumption is not.
Energy demand in the OECD32 is projected to decline by about 7 percent over The Outlook period, even though its collective GDP is seen rising by about 80 percent. This achievement is due to improved efficiency across all sectors. Developing countries are also expected to see significant efficiency gains, but these should be outpaced by economic growth.
It is important to note that improved efficiency is one factor behind an overall slowdown in global energy demand growth. While global demand for energy is projected to rise by about 35 percent from 2010 to 2040, that is less than half the growth rate seen during the previous 30-year period from 1980 to 2010. In addition, we estimate that three quarters of this increased energy demand will occur in the first half of The Outlook period (2010 to 2025).