Though current energy headlines might focus on the downturn in crude, gas and liquids prices, the long-term outlook for these products is very bright, according to ExxonMobil Corp.’s latest long-term energy forecast: “The Outlook for Energy: A View to 2040.”

Much of the gains are due to advancements in developing nations, especially China and India. Together these countries are expected to account for half of the world’s energy growth due to increased populations and an expanding middle class. Additional growth will come from Brazil, Mexico, South Africa, Nigeria, Egypt, Turkey, Saudi Arabia, Iran, Thailand and Indonesia.

“Over the next few decades, population and income growth—and an unprecedented expansion of the global middle class—are expected to create new demands for energy. We see global energy consumption rising by about 35% from 2010 to 2040,” the report said. This growth accounts for improved efficiency, as without improved heating and transportation technology the forecast would be 140% growth instead.

Though population growth is an important factor in determining energy demand growth, it is the convergence of population and economic growth that really drives energy demand. “The Brookings Institution estimates 2.8 billion people will join the middle class between 2010 and 2030, and almost all of them will live in developing countries,” the report said. ExxonMobil noted that 80% of new middle-class entrants will come from these countries. This corresponds with where the bulk of energy growth will occur, with the report anticipating 70% coming from these same nations.

Perhaps the most interesting part of this growth story is that despite the anticipation for economic growth in Organization for Economic Cooperation and Development (OECD) nations, energy consumption is not expected to grow as energy demand will decrease by 7% despite an expected 80% increase in GDP during the study’s time frame. The bulk of the overall demand growth will occur in the first half of the study, from 2010 to 2025.

This is due to improved efficiency across all sectors. While improved economics equates to more vehicles on the road, increased efficiency means that energy demand from these vehicles isn’t keeping pace with the increased usage of the vehicles themselves.

“Driving the growth in energy for transportation—in every region—is commercial transportation: heavy-duty vehicles, marine, aviation and rail … Remarkably, energy demand for cars and other personal vehicles is expected to rise only slightly from 2010 to 2040, as fuel economy improvements in passenger cars over time essentially offset a steep rise in the number of cars in the world,” the report said.

Car ownership is expected to increase with the rise of the middle class in developing nations with China accounting for about 40% of the global fleet increase and India, Brazil and Indonesia also accounting for much of the growth. By 2040, it is expected that China’s light-duty vehicles fleet will increase to 400 million, which is very impressive considering that this figure was only 60 million as of 2010.

These figures are still well off auto ownership growth found in OECD nations on a per capita basis. And ExxonMobil anticipates China following the growth in South Korea, where vehicle growth per capita is limited by high population density and government policies that support public transportation.

Efficiency gains are the primary reason why the expected energy demand growth is projected to be slower than in the previous 30-year period from 1980 to 2010. The report states that efficiency is expected to nearly double from an average of 25 miles per gallon (mpg) in 2010 to 45 mpg in 2040 with hybrid light-duty ownership increasing from 1% in 2010 to 33% in 2040 on a global basis.

By 2025, heavy-duty vehicles will surpass light-duty vehicles as the largest energy consuming segment of the transportation sector, which will support increased demand for natural gas as it emerges as a competitive alternative fuel to diesel.

“While the initial cost of natural gas trucks – equipped for either compressed natural gas [CNG] or liquefied natural gas [LNG]—can be tens of thousands of dollars higher than conventional diesel trucks, in some markets, prices of natural gas relative to diesel over time may provide significant cost savings on fuel. In addition, natural gas can provide benefits in reducing emissions,” according to the report.

Natural gas is also expected to become the fuel of choice for electric generation as ExxonMobil anticipates heavy industry use of natural gas to nearly double. “With the availability of technologies like energy-efficient variable-speed motors, the growth in gas production in many regions, and a global emphasis on clean air and emissions reduction, we expect the rest of the world to increasingly turn to electricity and natural gas to fuel their industrial growth,” the company said.

NGL is expected to make significant gains on naphtha as the favored petrochemical feedstock by 2040 with demand increasing by 125%, while naphtha demand is expected to increase 70% during the same period. In the middle of this study, it is expected that NGL will surpass naphtha as the most preferred feedstock before leveling off and sharing that designation with naphtha by the end.

LPG is also expected to make major gains over the study’s time period. It is replacing wood and dung for cooking and heating in Africa and Asia Pacific, where it will grow by 200% and 75%, respectively, while increasing its global usage by 55%. This is the highest growth rate for any oil-based residential fuel. LPG is expected to make up more than 80% of residential oil demand in 2040.

Perhaps the largest difference involving the energy industry over this 30-year period isn’t the improved economies and population growth, but the fact that North America will become a net exporter of natural gas—by 2025 North America will be a “significant” exporter and by 2040, the continent will rival Asia Pacific’s LNG exports.

“This shift, unthinkable a decade ago, is a remarkable example of the combined potential of technology and trade to enhance global energy and economic prosperity,” the report said.

ExxonMobil states that North American liquids production will increase by more than 10 MMboe/d through 2040, or more than 65% with demand decreasing about 1 MMboe/d due to light-duty transportation efficiency.

Natural gas demand will increase by 65% from 2010 to 2040, the largest-volume growth of any energy source, the report said.

Though other energy sources are expected to make considerable gains in the market, crude oil will remain the world’s top energy source as ExxonMobil anticipates demand increasing by nearly 30% as commercial transportation and chemical industry demand grows.

Contact the author, Frank Nieto, at fnieto@hartenergy.com.