Exxon Mobil (NYSE:XOM) predicts that global demand for energy will increase 30% by 2040, led by economic growth in developing nations. This estimate and others regarding future supply and demand for energy are contained in the company's annual energy outlook report.

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

Outlook For Energy
The Outlook For Energy is published annually by Exxon Mobil and covers long-term supply and demand trends for crude oil, natural gas, coal and other forms of energy. The company also extended the report's time horizon, adding 10 years and bringing the end date to 2040.

Other major oil companies have similar reports. Energy Outlook 2030 also attempts to predict long-term trends in energy use, and is issued by BP (NYSE:BP) at the beginning of each year. (To learn about investing in oil, read A Guide To Investing In Oil Markets.)

Exxon Mobil predicts that demand for energy will grow at an annual rate of 0.9% from 2010 to 2040. The global assumptions behind this expected growth in energy demand are annual population growth of 0.8% and annual GDP growth of 2.9% over the 30-year time horizon.

Much of the growth in energy demand will be due to economic trends in the developing world, which Exxon Mobil expects to continue through 2040. Energy demand from the developing world is expected to be nearly 60% higher in 2040, compared to 2010.

The increased use of electricity will be a major influence on energy demand and Exxon Mobil believes that growth here will be higher than demand in the residential, industrial, transportation or commercial sectors.

One important prediction made by Exxon Mobil involves the mix of fuels used to produce electricity. The company believes that the trend towards using fuels with less carbon content will continue over the next generation and that natural gas will produce 30% of global electricity by 2040.

Coal currently produces much of the world's electricity and Exxon Mobil predicts that coal will still maintain this rank in 2040. However, the company believes that its use as a fuel will eventually peak and then start to decline. (For related reading, see Peak Oil: What To Do When The Wells Run Dry.)

Transportation Efficiency
Exxon Mobil also expects to see improvements in energy efficiency in the transportation sector, with advanced hybrid vehicles holding a 50% market share by 2040, compared to only 1% in 2010. This trend will increase the average fuel efficiency of new vehicles to 50 miles per gallon by 2040.

The auto industry is on the way to reaching this fuel efficiency goal. Toyota Motor (NYSE:TM) manufactures the Prius line of hybrid vehicles and estimates that current models have a combined city and highway fuel efficiency of 50 miles per gallon. Honda Motor (NYSE:HMC) also manufactures hybrid vehicles and estimates that its Civic line of hybrids have combined fuel efficiency of 44 miles per gallon.

Exxon Mobil estimates that without the expected gains in fuel efficiency, global energy demand would be four times higher than the expected growth rate of 30%.

The Bottom Line
Although 30 years may be too long an investment horizon for even the most hardcore value investors, we should all pay attention to this report, as the changes predicted by Exxon Mobil will be profound, and given the lead time involved, this should not take any of us by surprise. (To learn more about value investing. read The Value Investor's Handbook.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  2. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  3. Mutual Funds & ETFs

    ETF Analysis: iShares Morningstar Small-Cap Value

    Find out about the Shares Morningstar Small-Cap Value ETF, and learn detailed information about this exchange-traded fund that focuses on small-cap equities.
  4. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  7. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  8. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  9. Mutual Funds & ETFs

    ETF Analysis: WisdomTree SmallCap Earnings

    Discover the WisdomTree Small Cap Earnings ETF, a fund with a special focus on small-cap and micro-cap stocks with positive earnings.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares US Regional Banks

    Obtain information and analysis of the iShares US Regional Banks ETF for investors seeking particular exposure to regional bank stocks.
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Profit Margin

    A category of ratios measuring profitability calculated as net ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis ...
  4. Debt Ratio

    A financial ratio that measures the extent of a company’s or ...
  5. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing ...
  6. Net Present Value - NPV

    The difference between the present values of cash inflows and ...
  1. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. What is the difference between the return on total assets and an interest rate?

    Return on total assets (ROTA) represents one of the profitability metrics. It is calculated by taking a company's earnings ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!