Fossil fuels will remain the world's main energy source for the next three decades, with natural gas challenging coal's spot as the dominant source of electricity, according to Exxon Mobil Corp.'s annual energy forecast released Thursday.
The report projects that increased focus on reducing carbon emissions will cause demand for coal to peak in the next 15 years. Meanwhile, demand for cleaner-burning natural gas will rise by more than 60 percent through 2040.
Developing economies in Latin America, China, India and Africa will drive most of the boom in global demand, said Bill Colton, Exxon Mobil vice president of corporate strategic planning. More energy will be needed to power their growing commercial and industrial sectors and their citizens' improved standards of living.
Electricity remains the largest draw on energy, and rapid improvements in the energy efficiency of buildings and appliances won't be enough to curb demand, Colton said at a news conference Thursday morning.
"As the world population expands and living standards improve, the world will need more energy, even as we learn to use energy more efficiently," Colton said.
In 2010, coal, oil and natural gas supplied 82 percent of the world's energy, according to the report, and those fossil fuels still will supply 78 percent in 2040. Renewable fuels, primarily wind, will be the fastest-growing energy sources, but they will remain a minor slice of the global energy supply, increasing from 3 percent in 2010 to 7 percent in 2040, the report projects.
Regulations called key
Craig Pirrong, finance professor at the University of Houston, said the lower environmental and economic costs will fuel the demand for natural gas and decline of coal. But how quickly the change occurs depends largely on mercury and carbon emission standards governed by the U.S. Environmental Protection Agency and other global government agencies, he said.
"A good deal of it will be driven by regulations and politics," Pirrong said. "That is in the hands of the EPA, which could lead to a more rapid shutdown of coal plants to bring them in compliance."
The rise of hybrids
The report also expects hybrid vehicles, which run partially on traditional liquid fuels and partially on electricity, to have a significant effect on energy use. By 2040, hybrids will account for 40 percent of all light-duty vehicles on the road, the report projects, but natural gas and plug in-electricity will power only a sliver of the vehicles.
Jay Friedland, legislative director for advocacy group Plug In America, said the report overlooks the potential for the price of electric cars to fall and gasoline prices to rise.
"When gas gets to the tipping point at $4 or $5 a gallon, people completely change their consumer behavior," Friedland said.
"Exxon is looking backward and not forward, when we will see significant improvements in battery costs," which would lower the price of electric cars, he said.
Pirrong said that while the economics of energy are somewhat reliable, forecasts can get dicey when they look ahead several decades. He noted that less than a decade ago, the nation feared it would face a shortage of natural gas.
"That whole world has turned upside down, and now we are saying natural gas is going to be abundant.For both political and technological reasons, making a forecast out that long is a shot in the dark," he said.
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