This past week, a friend of mine who happens to be a stockbroker dropped me an email with a link. The link led to a press release from ExxonMobil that contained the energy giant’s annual long term outlook for energy, the 2014 edition. The 58-page report, which contains an overall company view of world energy supplies and demand through the year 2040 and beyond, is a broadly optimistic one, painting a picture that fossil fuels — primarily crude oil and natural gas — will continue to supply about 60 percent of the world’s energy demands through the next 30 or so years. The Houston Chronicle also ran a story this past Friday highlighting the report, with a byline stating that the energy giant says that there are decades of life in fossil fuels.
The highlights of ExxonMobil’s report are that:
1) The world population will increase from 7 billion in 2013 to 9 billion by the year 2040. World demand for energy will increase by around 35 percent from today’s levels, but this figure assumes strong conservation efforts. Vehicle miles per gallon are envisioned by ExxonMobil to increase to an average of 45 miles per gallon by 2040. The ExxonMobil report correctly notes that higher energy use is strongly statistically correlated with higher incomes and living standards, and envisions the world motor-vehicle fleet growing from 800 million motor vehicles in 2010 to 1.7 billion in 2040. This growth in the number of vehicles will be driven by increasing prosperity in the developing world, and increasing incomes are also correlated with higher levels of vehicle ownership and use.
2) ExxonMobil envisions an increased interest in natural gas as a vehicle fuel, but only in certain markets and areas of the world. Electricity demand will also rise and is linked to increased urbanization.
3) The report asserts that some 35 percent of all crude oil and condensate that will ever be produced will be consumed by the year 2040. Since some estimates are that Mankind had consumed some 15 percent of all the oil that has ever been produced, the report implies that another 20 percent will be consumed over the next 25-30 years. That in turn would imply that the world will deplete all of the world’s known crude oil by sometime around the end of this century, or sometime into the 22nd century. The world’s supply of natural gas is envisioned to last about 200 years.
So what does this mean for Houston, the energy capital of the world? Well, the reason for the existence of cities is that they are agglomerated labor markets. The Houston of the 19th century was a small town, which operated as a trading hub for agricultural goods (like rice, sugar, and cotton) that were grown from around Houston and southeast Texas. However, during the 20th century, Houston grew up and roughly 50 percent of all the jobs in the Houston metropolitan area are now tied to the oil and gas industry. Assuming the broad outlines of ExxonMobil’s report are generally correct — and trying to make predictions about the far future is always a very risky business — it means that the Houston area will likely grow and thrive for many decades — perhaps another century — in its present form. After that, the Houstonians of the 22nd century and beyond will have to come up with some other reason to justify our great City’s existence.