ExxonMobil: Fuel Efficiency Will Offset Light-Duty Demand Growth More Than Fleet Mix Changes

02.06.18 | Blog | By:

ExxonMobil’s Outlook for Energy: A View to 2040 anticipates that global energy needs will rise about 25% over the period to 2040, led by non-OECD countries, same as it projected last year (see post Jan. 9, 2017). While the mix shifts toward lower-carbon-intensive fuels, the world will need to pursue all economic energy sources.

The Outlook projects that global transportation-related energy demand will increase by close to 30% (over the 25% projected last year) by 2040. At the same time, total miles traveled per year by cars, sport utility vehicles (SUVs) and light trucks will increase about 60%, reaching about 14 trillion in 2040. As personal mobility increases, average new-car fuel economy (including SUVs and light trucks) will improve as well, rising from about 30 miles per gallon (7.83 l/100 km) now to close to 50 miles per gallon (4.7 l/100 km) in 2040, the same as projected last year.

I compared last year’s Outlook to this year’s to get a sense of how the company’s thinking has evolved on transport-related issues. This is summarized in the chart below.

Comparison of Key Findings in the ExxonMobil 2017 v. 2018 Outlook for Energy

The Impact of Electrification

There’s new commentary and analysis on electrification in the 2018 Outlook. Exxon notes that there are approximately 2 million EVs in the global fleet, or about 0.2% of the total, and acknowledges the car ban phenomena. “Recently, some car manufacturers and governments have announced plans to limit future vehicle sales to those with an electric motor, including hybrids, plug-in hybrids and battery electric vehicles.”

The company expects that the EV fleet will see strong growth driven by decreasing battery costs, and increasing model availability and continued support from government policies. This is shown in the figure below. However, future battery costs and government policies are uncertain, Exxon notes, pointing out the “wide range of perspectives on future electric vehicle growth, with third-party estimates for 2040 ranging from a factor of three higher and lower than the Outlook.”

The Impact of Personal Mobility, Fuel Efficiency & Fleet Mix

Exxon also highlights the growth in personal mobility noting that, assuming the current fleet mix and fuel efficiency, there would be a significant increase in energy demand in this area but this will ultimately be offset by efficiency gains (which is what the company said last year). The impact of fuel efficiency is much greater than changes to the fleet mix, and is shown in the figure below.

Potential Impacts to Light-Duty Liquids Demand

Also new this year is a sensitivity analysis to help assess potential impacts to light-duty liquids demand using alternate assumptions around electric vehicle penetration, changes in fuel efficiency or broader mobility trends. The company found that for every additional 100 million EVs on the road in 2040, liquids demand could fall by ~1.2 million barrels per day. If the entire light-duty fleet is electrified in 2040, total liquids demand could be approximately the same as in 2013. This analysis is summarized in the figure below.

Exxon points out that consumer preferences have actually slowed the increase in the fuel efficiency of new vehicle sales in both the OECD and non-OECD, and if that trend continues, we could see more than 2 million barrels per day of liquids demand by 2040. I think that could be a real possibility, not just because consumers may prefer larger vehicles to drive, as we’re seeing here in the U.S. right now. It’s also because, as many studies have shown, consumers can have the tendency to drive their fuel efficient vehicles even more and current fuel economy policies can fall short in addressing this kind of behavior.

Pursuing a 2°C Pathway

Finally, this year’s Outlook also includes a new section, “Pursuing a 2°C Pathway.” It provides a view of potential pathways toward a 2°C climate goal, and the implications such pathways might have in terms of global energy intensity, carbon intensity of the world’s energy mix and global demand for various energy sources. The section concludes with a discussion of the need to pursue practical, cost-effective solutions to address multiple goals simultaneously. Exxon notes that “transitioning toward a 2°C pathway, as suggested by the range of related 2040 performance levels shown on the chart, would imply that global emissions peak and steadily fall to close to 1980 levels by 2040. This is daunting, considering the global population may be twice as large, and the world’s economy may be five times as large by 2040 versus 1980 levels.”