Technology can overturn the most established industries – even digging for energy. Exxon Mobil and OPEC expect that oil and gas will still be the sources of the lion’s share of the world’s energy in 2040. Solar and wind will remain bit-players, they say. Their forecasts are ripe for disruption.
Exxon, which published its annual Outlook for Energy on Monday, reckons that oil and gas together will meet some 58 percent of global energy demand about a quarter-century from now. That doesn’t differ much from the current market structure or from Exxon’s forecast a year ago, despite the landmark global agreement on emissions reduction and other steps to mitigate climate change reached in Paris last month.
OPEC predicted a similar 2040 market share for oil and gas of 53 percent in its annual outlook, released in December. Wind and solar energy only account for about 4 percent of the global energy supply by then in both prognosticators’ scenarios.
The similarities between the outlooks, and their relative lack of volatility from year to year, seem remarkable given the extended time frame and the many complexities involved. That may come down to similar assumptions about population and GDP growth. It could also reflect the snail’s pace of past industry shifts. It took 60 years first for coal and then for oil to dominate the global energy mix. Some observers, including Canadian academic Vaclav Smil, argue that the world may be facing a similarly lengthy transition to carbon-free fuels.
Oil producers would do well not to be complacent, however. After all, they have missed a few tricks. Along with its peers, Exxon failed to recognize the speed and extent of the shale revolution happening right in its American backyard.
The International Energy Agency has also tended to underestimate the spread of wind and solar energy in recent years. Driverless cars and more efficient battery storage are among the technological advances that could upend simplistic forecasts based largely on what former U.S. Defense Secretary Donald Rumsfeld famously dubbed “known knowns.” The establishment energy outlook is vulnerable to disruption from the unknowns, both known and otherwise.