The World’s Projected Energy Mix, from 2018-2040
Since 1977, the International Energy Agency (IEA) has put together the World Energy Outlook, a highly anticipated annual report that looks towards the future of energy production and consumption on a global basis.
In the latest edition, the report dives into two very different policy scenarios that help illustrate the choices and consequences we have ahead of us.
In this post, we’ll look at each policy scenario and then dive into the associated numbers for each, showing how they affect the projected global energy mix from 2018 to 2040.
The Policy Scenarios
The IEA bases its projections based on two policy scenarios:
- The Stated Policies Scenario
This scenario is intended to reflect the impact of existing public policy frameworks, including announced policy intentions.
- The Sustainable Development Scenario
This scenario outlines a major transformation of the global energy system, aligned with achieving the energy-related components of the United Nations’ Sustainable Development Goals (SDGs), such as reducing carbon emissions.
Neither scenario is technically a forecast; the IEA sees both scenarios as being possible.
However, this data can still provide a useful starting point for decision makers and investors looking to read the tea leaves. Will countries stick to their guns on their current plans, or will those plans be scrapped in the name of bolder, sustainable initiatives?
Scenario 1: Stated Policies
Today’s chart shows data corresponding to this policies scenario, as adjusted by CAPP.
See the energy use data below, shown in terms of Millions of Tonnes of Oil Equivalent (Mtoe):
|2018||2030||2040||Est. % of mix (2040)|
Note: Data is based on CAPP conversion estimates, and is rounded to nearest 50 Mtoe.
In the Stated Policies Scenario, oil will be the largest energy source in 2040, making up about 28% of the global energy mix — and natural gas will be right behind it, for 25% of supply.
Coal consumption, which is decreasing in Western markets, will stay consistent with 2018 levels thanks to growing demand in Asia.
Meanwhile, renewable energy (excl. hydro) will see an impressive renaissance, with this category (which includes wind, solar, geothermal, etc.) increasing its portion in the mix by over 300% over 22 years.
Scenario 2: Sustainable Development
The IEA’s Sustainable Development scenario is very different from the status quo, as shown here:
The contrast between the energy needed in the Stated Policies (STEPS) and Sustainable Development (SDS) projections is stark, going from a 2,500 Mtoe increase to a 800 Mtoe decrease in total consumption, driven by residential and transportation sectors.
Under this scenario, renewable energy use for electricity consumption (incl. hydro) would need to increase by 8,000 TWh more, with ultimately more than half of it in Asia.
|Renewable Energy (Electricity Generation)||2018||2040||% Increase|
|Stated Policies||6,800 TWh||18,049 TWh||165%|
|Sustainable Development||6,800 TWh||26,065 TWh||283%|
Under this transformational and ambitious scenario, fossil fuel use would plummet. Coal consumption would drop by roughly 60%, oil consumption by 30%, and the role of natural gas in the energy mix would remain stagnant.
Two Scenarios, One Path
Both scenarios are a possibility, but in reality we will likely find ourselves somewhere in between the two extremes.
This makes these two baselines a helpful place to start for both investors and decision makers. Depending on how you think governments, corporations, and organizations will act, you can then adjust the projections accordingly.
What’s Made from a Barrel of Oil?
Oil is a building block that makes modern life possible. Here are the proportion of finished products that are created from a barrel of oil.
What Products Are Made from a Barrel of Oil?
From the gasoline in our cars to the plastic in countless everyday items, crude oil is an essential raw material that shows up everywhere in our lives.
With around 18 million barrels of crude oil consumed every day just in America, this commodity powers transport, utilities, and is a vital ingredient in many of the things we use on a daily basis.
This graphic visualizes how much crude oil is refined into various finished products, using a barrel of oil to represent the proportional breakdown.
Barrel of Oil to Functional Fuel and More
Crude oil is primarily refined into various types of fuels to power transport and vital utilities. More than 85% of crude oil is refined into fuels like gasoline, diesel, and hydrocarbon gas liquids (HGLs) like propane and butane.
Along with being fuels for transportation, heating, and cooking, HGLs are used as feedstock for the production of chemicals, plastics, and synthetic rubber, and as additives for motor gasoline production.
|Refined Crude Oil Product||Share of Crude Oil Refined|
|Hydrocarbon gas liquids||2.0%|
Source: Canadian Association of Petroleum Producers
Crude oil not only powers our vehicles, but it also helps pave the roads we drive on. About 4% of refined crude oil becomes asphalt, which is used to make concrete and different kinds of sealing and insulation products.
Although transportation and utility fuels dominate a large proportion of refined products, essential everyday materials like wax and plastic are also dependent on crude oil. With about 10% of refined products used to make plastics, cosmetics, and textiles, a barrel of crude oil can produce a variety of unexpected everyday products.
Personal care products like cosmetics and shampoo are made using petroleum products, as are medical supplies like IV bags and pharmaceuticals. Modern life would look very different without crude oil.
The Process of Refining Crude Oil
You might have noticed that while a barrel of oil contains 42 gallons, it ends up producing 45 gallons of refined products. This is because the majority of refined products have a lower density than crude oil, resulting in an increase in volume that is called processing gain.
Along with this, there are other inputs aside from crude oil that are used in the refining process. While crude oil is the primary input, fuel ethanol, hydrocarbon gas liquids, and other blending liquids are also used.
|U.S. Refiner and Blender Inputs||Share of Total|
|Hydrocarbon gas liquids||3.0%|
The process of refining a 30,000-barrel batch of crude oil typically takes between 12-24 hours, with refineries operating 24 hours a day, 365 days a year. Although the proportions of individual refined products can vary depending on market demand and other factors, the majority of crude oil will continue to become fuel for the world’s transport and utilities.
The Difficulty of Cutting Down on Crude Oil
From the burning of heavy fuels that tarnish icebergs found in Arctic waters to the mounds of plastic made with petrochemicals that end up in our rivers, each barrel of oil and its refined products impact our environment in many different ways.
But even as the world works to reduce its consumption of fossil fuels in order to reach climate goals, a world without crude oil seems unfathomable.
Skyrocketing sales of EVs still haven’t managed to curb petroleum consumption in places like Norway, California, and China, and the steady reopening of travel and the economy will only result in increased petroleum consumption.
Completely replacing the multi-faceted “black gold” that’s in a barrel of oil isn’t possible right now, but as electrification continues and we find alternatives to petrochemical materials, humanity might at least manage to reduce its dependence on burning fossil fuels.
Mapped: Visualizing U.S. Oil Production by State
The U.S. is the largest oil producer in the world. Here we map the share of oil production in the country by all 50 states in 2020.
Mapped: Visualizing U.S. Oil Production by State
In 2018, the United States became the world’s top crude oil producer. It has strongly held this position ever since.
According to the U.S. Energy Information Administration (EIA), the country accounted for nearly 15% of the world’s total oil production in 2020, churning out close to 13 million barrels of crude oil per day—more than Russia or Saudi Arabia.
Although total U.S. oil production declined between 1985 and 2008, annual production increased nearly every year from 2009 through 2019, reaching the highest amount on record in 2019.
The Dominant Oil Producing States
Impressively, 71% of total U.S. oil production came from just five states. An additional 14.6% came from the Gulf of Mexico, which is a federal jurisdiction.
Here are the five states that produce the largest amount of crude oil:
|Share of Total Production|
Rounding the top 10 are states like Alaska, California, Wyoming, Louisiana, and Utah.
Texas is undoubtedly the largest oil-producing state in the United States. In 2020, Texas produced a total of 1.78 billion barrels of oil. Texas is home to the most productive U.S. oil basin, the Permian, routinely accounting for at least 50% of total onshore production. A distant second is North Dakota, which produced about 431.2 million barrels of oil in 2020.
Regional Distribution of U.S. Oil Production
A total of 32 of the 50 U.S. states produce oil. They are divided among five regional divisions for oil production in the U.S., known as the Petroleum Administration for Defense Districts (PADD).
These five regional divisions of the allocation of fuels were established in the U.S. during the Second World War and are still used today for data collection purposes.
Given that Texas is the largest U.S. oil-producing state, PADD 3 (Gulf Coast) is also the largest oil-producing PADD. PADD 3 also includes the federal offshore region in the Gulf of Mexico. There are around 400 operational oil and gas rigs in the country.
Impact of U.S. Oil Production on Employment
Rapid growth in oil production using advanced drilling methods has created high-paying jobs in states like North Dakota and Texas.
Thanks to the rapid development in the Bakken Shale formation, North Dakota boasts the nation’s lowest unemployment rate. The state has also grown personal income and state economic output at a fast rate, due to oil and gas industry growth.
Oil production from the Eagle Ford Shale has transformed a relatively poor region of South Texas into one of the nation’s most significant economic development zones. In fact, due largely to the oil and natural gas industry, the Texas Comptroller estimates that Texas has recovered 100% of the jobs lost during the Great Recession.
Looking to the Future
The U.S. slashed its oil production forecast through next year just as OPEC and its allies begin to roll back their production cuts in the coming months.
U.S. oil output will drop to 11.04 million barrels a day this year, down from a forecasted 11.15 million. This was a result of the deep freeze that shut down the oil industry in Texas. The EIA also lowered its output forecast for 2022 by 100,000 barrels a day.
Despite its forecast for a rise in supply from outside the cartel this year, OPEC said in its report that it is uncertain about the levels of investment expected to determine the non-OPEC supply outlook for the years to come.
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