Energy Markets 2050: Alternatives Growing Fast but Hydrocarbons Retain Dominance
September 19, 2023
By Conning's Commodities Investment Research Team
Despite heightened concerns regarding fossil-fuel emissions and climate change, global demand for hydrocarbons is expected to rise. They will likely remain the dominant energy resource in a world that expects energy demand to increase for several decades.
Recent projections by three different organizations – energy producer Exxon Mobil Corporation (Exxon), the U.S. Energy Information Administration (EIA) and the Massachusetts Institute of Technology (MIT) – agree on the global demand growth for hydrocarbons (see Figure 1).1 Demand is rising due to an expected growth in global energy consumption of at least 0.9% per year on average through 2050, driven by a 2.7% compound annual growth rate (CAGR) in GDP.2
All three reports project oil consumption will increase but natural gas consumption should outpace it, driven largely by growth in the global liquified natural gas export market and support of the U.S. electricity grid. However, the growth outlook for coal remains mixed. Non-hydro renewables (biomass, geothermal, solar, and wind) will also likely see strong growth as analysts have become significantly more bullish on the category than they were less than a decade ago: renewables have a projected CAGR of 4.5% and are now expected to comprise about 23% of primary energy consumption by 2050, compared to just 2.6% in 2015.3
But regardless of the energy source, the future is likely to see a significant increase in energy infrastructure to support the growing need to transport and store these sources of energy.
Electric vehicles (EVs) are becoming more efficient, and their growth should lead to reduced automobile-based oil demand – but greater electricity demand. This demand shift, along with a continued electrification of the economy, is projected to drive a greater need for natural gas relative to oil as the former is the electrical grid’s leading energy source. Non-OECD countries, mainly emerging market economies, should also help drive hydrocarbon growth as rising energy demand will be part of their efforts to improve living standards as GDP rises. The rising demand will also likely lead to greater investments in hydrocarbon-related infrastructure.
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1: Sources: © 2003-2023 Exxon Mobil Corporation “ExxonMobil Global Outlook Executive Summary: Our view to 2050,” https://corporate.exxonmobil.com/-/media/global/files/global-outlook/2023/2023-global-outlook-executive-summary.pdf, released August, 2023 (“Exxon Report”); © 2021 MIT Joint Program on the Science and Policy of Global Change, “2021 Global Change Outlook,” https://globalchange.mit.edu/sites/default/files/newsletters/files/2021-JP-Outlook.pdf, released May 26, 2021, Sergey Paltsev and C. Adam Schlosser, lead authors (the “MIT report”); U.S. Energy Information Administration, “Annual Energy Outlook,” https://www.eia.gov/outlooks/aeo/pdf/AEO2023_Narrative.pdf, released March 2023 (the “EIA report”).
2: Energy-demand growth is average of 2020-2050 energy-demand CAGR listed in the Exxon, MIT and EIA reports; global GDP CAGR is average of 2020-2050 GDP CAGR in the Exon, MIT, and EIA reports.
3: Renewables CAGR and expected consumption percentage are averages of the Exxon, MIT and EIA reports; 2015 consumption percentage is per Conning, “Energy Markets 2040: Alternatives Have Growing Cachet but Hydrocarbons Still Rule the Day,” by Marcus McGregor, Eric Gallic, and Matthew Nilson, January 2018, https://go.conning.com/rs/461-JPO-444/images/Viewpoint%20-%20Energy%20Markets%202040.pdf
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