North America, once a sponge that sucked in a significant portion of the world’s oil, will instead be supplying the world with oil and other liquid hydrocarbons by the end of this decade, according to ExxonMobil’s annual long-term energy forecast.
And the “almost unspeakable” amount of natural gas found in recent years in the U.S. and elsewhere in North America will be enough to make the region one of the world’s biggest exporters of that fuel by 2025, even as domestic demand for it increases, according to Bill Colton, Exxon’s chief strategist.
“The world has such an improved outlook for supplies,” Colton said in an interview. “Peak oil theorists have been run out of town by American ingenuity.”
In a forecast that might make economists happy but environmentalists fret, Exxon says its two chief products, oil and natural gas, will be abundant and affordable enough to meet the rising demand for energy in the developing world as the global middle class swells to 5 billion people from 2 billion people and buys energy-hungry conveniences such as cars and air conditioners.
This is a result of advances in drilling technology, such as hydrofracturing or “fracking”, that have made it possible for engineers to reach oil and gas in unconventional rock and extreme locations.
The rise of fracking has quieted talk that the world was quickly running out of oil.
Demand for energy will grow rapidly in coming decades in the developing world, while demand in the developed world is expected to be flat or even decline as countries impose stricter emissions policies and become more efficient.
Exxon’s outlook forecasts world energy supply and demand through 2040 and is updated every year. It is noted by investors and policymakers and used by Exxon to shape its long-term strategy.
Colton said the recent sharp recent decline in oil prices does not have much effect on the company’s long-term vision.
The use of coal, now the world’s second most important fuel after oil, will eventually slip as countries try to reduce air pollution and greenhouse gas emissions. Natural gas, which burns cleaner than coal and emits half the global warming gases as coal, will supplant coal in the number two spot.
Exxon takes a relatively dim view of the prospects for renewable energy, however. It believes that some of the aggressive targets for renewables cited by governments are too expensive to come to fruition, and the technologies have not advanced far enough to make them cheap or effective enough for broad adoption globally.
“They are just not ready for prime time,” Colton says.
While Exxon expects wind, solar and other non-hydro electric energy to grow faster by far than any other energy technology over the period, those renewables will provide just 4% of the world’s energy by 2040, up from 1% in 2010, the company says.
Fossil fuels will still dominate: Oil will account for 32% of world energy, natural gas for 26%, and coal for 19%. Nuclear and biomass will account for 8% each, and hydroelectric power will account for 3%.
Exxon’s vision is broadly similar to that of other forecasters, including those by the International Energy Agency, which released its most recent long-term forecast last month.
Michael E Mann, a climate scientist and director of Penn State’s Earth System Science Center, notes that many experts dispute Exxon’s conclusion on renewables.
Mann said that renewable energy is competitive in several places around the world with the price of traditional power, even without a high price on carbon pollution that Exxon and others seem to agree is coming.
Scientists say if Exxon’s vision comes to pass, the world’s climate system will become dangerous and chaotic, and some environmental economists suggest that economies will be forced to stop burning fossil fuels at such high rates to prevent catastrophic climate change.
“Exxon’s vision of a fossil fuel-driven future is one in which carbon dioxide levels rise well beyond the dangerous limit, where we will witness fundamental threats to food, water, land, our economy, national security, and our environment,” Mann says. “Let us hope, for the sake of us and our planet, that this is not our future.”
Other recent scientific studies have raised questions about whether oil and gas companies and government forecasters are overestimating how much oil and gas is accessible in the shale formations.
Ken Cohen, Exxon’s government and public affairs chief, says the studies “are not consonant with the facts.”
Cohen says Exxon is finding instead that improving technology is increasing productivity of each well they drill.
That will mean that the end of the decade, North America will be exporting more oil and liquid hydrocarbons than it imports – a remarkable turnaround for a region that was a major global importer.
“Limitations [to oil production] are political and policy-related more than technical,” Cohen says.