Exxon’s optimistic oil outlook: forecast or fantasy?

Exxon’s optimistic oil outlook: forecast or fantasy?

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On the day government ministers landed in Lima for the climate talks, ExxonMobil suggested they might as well all go straight back home.

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Oil Change International

rsz_3515471358_721aff19b4On the day government ministers landed in Lima, Peru, for the COP20 climate talks, ExxonMobil suggested they might as well all go straight back home.

The company’s economists have done their calculations and found that fossil fuels will continue expanding for the coming decades. So the ministers are wasting their time trying to save the climate.

Today ExxonMobil released its Outlook for Energy, which it has published annually since 2005. It predicts that oil and gas use will expand throughout the period to 2040, and oil will remain the world’s largest fuel source.

In the past, most international climate summits haven’t given oil companies very much to fear. But this time round they may be getting more nervous, with proposals on the table to phase out fossil fuel emissions by 2050.

The good news? ExxonMobil’s outlook is not a forecast; it’s the company’s fantasy. This became clear as we looked deeper into the numbers.

ExxonMobil has got its forecasting wrong before. In its first Outlook in 2005, it predicted wind and solar would provide 1% of the world’s energy by 2030. Wind and solar achieved this share in 2012, after 7 years rather than 25. The world’s use of those two clean energy sources has grown rapidly, by an average rate of more than 25% per year.

So ExxonMobil won’t make the same mistake again, right? Wrong. The company is predicting growth of just 7% in wind and solar use from 2010 to 2025, leading to a market share of just 2% in 2025 and 3% in 2040.

ExxonMobil is expecting this crash in growth rates just at the time that the new technologies are becoming cost-competitive with natural gas, coal and nuclear. For example, wind and residential solar are already as cheap as gas power in Japan, the USA and much of Europe.

While wind and solar are used in power generation, oil is used mainly in transportation. So the technological challenge to oil is from electric vehicles (EVs).

Like renewables, EVs are getting rapidly cheaper. Given improvements in battery technology, investment bank UBS projects that EVs could be cost-competitive with oil-fuelled cars by 2020, even without subsidies.

In last year’s outlook, ExxonMobil took a different view, expecting batteries to stay costly, and EVs to make up only 5% of the vehicles on the road by 2040. This year, same conclusion, for a different, unspecified reason: “Even though battery costs are likely to fall in coming decades, electric vehicles will continue to face significant challenges as other alternatives also improve.” Which alternatives? A technology so advanced they can’t even tell us what it is…

There is another huge assumption behind ExxonMobil’s outlook: governments won’t take any significant action on climate change. Not just at the current conference in Lima or in Paris next year, but for the next two decades.

Responding earlier this year to the latest science on what’s needed to keep warming below an average of 2°C, the company said, “the scenario where governments restrict hydrocarbon production in a way to reduce [greenhouse gas] emissions 80 percent during the outlook period is highly unlikely”.

That’s one hell of an assumption. It neglects the political impacts of more property damage, and of disruption to food production and water supplies. It neglects the political impacts of increasing numbers of economistsmilitary leaders and even some corporations calling for action to stop climate change. And, most important, it neglects people power: we saw it in the streets of New York in September, and we are only going to see it grow.

ExxonMobil’s forecast can only be correct if all three of those assumptions turn out to be right: the growth of renewables crashes, advances in batteries stall and governments take negligible action.

The reality is that ExxonMobil is not trying to give a realistic picture of the future; it is describing the future it wants to see. It knows that its best chance of derailing climate action is to make fossil fuel dominance look inevitable.

It was with this in mind that ExxonMobil first published its Outlook for Energy in 2005, according to Steve Coll’s book Private Empire. Research by ExxonMobil’s public relations department identified a target audience for the outlook, which it labelled ‘informed influentials’: policymakers, thinktanks, financial analysts and economists. But will they still believe the company?

With renewables steaming ahead and climate change on everyone’s mind, ExxonMobil looks increasingly desperate.

Source: Oil Change International. Reproduced with permission.

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  1. disqus_3PLIicDhUu 6 years ago

    Just another corporation headed by sociopaths, that would destroy their own planet and tell you black is white just to keep minority shareholders happy

  2. Ken Dyer 6 years ago

    When OPEC raises oil prices again, and they will very soon, all the posturing by the fossil fuelists will become increasingly irrelevant.

    The rise of renewables, will over time, wean the world away from fossil fuels,

    There is no mention of bio-fuels by ExxonMobil, another renewable technology that will make driliing for oil increasingly uneconomic.

  3. sean 6 years ago

    This also assumes that there will not be significant inroads into the oil market by synthetic oil. There may be oil use in the future, but there is no guarantee that it will come out of the ground.

  4. Peter 6 years ago

    Nothing more than a ‘wish list’ with optimistic assumptions with no regard to political realities – actually it may be a good thing in that Exxon just don’t see the impact of renewable technologies in the coming decades. As such they may not even have a ‘plan B’ where for instance they use their massive cash reserves to invest in bio fuels and other renewables.

  5. john 6 years ago

    Because of the poorly educated majority of people in western society and for that matter the emerging societies we will see an every increasing demand for fuel as made by Exxon.
    Now please do not decry this message we do have a problem and it is being very slowly mitigated by the more enlightened members of the global community.
    However they are very much in the minority the real crunch will come when the real cost of energy is felt by the ordinary consumer, this is when suddenly those who went along with the idea that FF is the savour or society will be in trouble.
    The result of a rise in the real cost of energy for personal transport will be felt by any poor government in power at that time.
    No doubt they will be tossed out regardless of ideas or knowledge the voters will react without any thought.

  6. Miles Harding 6 years ago

    I’m not sure how Exxon sees that ii is possible to expand production in the coming decades. Their own balance sheets are telling them that finding more of that black gold is bankrupting them.

    ref: Steven Kopits talk at Columbia CGEP Earlier this year gives a flavour of big oil’s predicament: https://www.youtube.com/watch?v=dLCsMRr7hAg

    What is apparent is that the cost of exploration and development of new oil fields is rising substantially and eroding profits, forcing the oil majors to reduce exploration and sell assets to maintain their cash positions. … And this is before the the most recent slide in oil prices.

    I believe that it has been clear for some time (since the 1970s) that the only course of action is to de-carbonise the economy, now with great urgency before the next oil shock hits and while there is still some capacity to act.

    Our wicked government is determined to see that this doesn’t happen, even in the face of the country’s double exposure to any disruption in oil supply. The country is both almost totally dependent (95%) on imported oil and has effectively zero strategic reserves. Undoubtedly, this will be one of the legacies of politics that is only concerned with ‘growth’ and willfully ignorant of the risks accumulating with each efficiency tweak or unrecognised warning sign.

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