Exxon Sees 'Great Promise' in Renewables, but the Reign Continues for Fossil Fuels

Renewable energy resources hold "great promise," Exxon Mobil Corporation (NYSE:XOM) (Irving, Texas) said, but climate goals may be out of reach as oil and natural gas continue to dominate the global energy sector."

Between now and 2050, developing countries will see GDP per capita more than double, driving higher demand for energy," Exxon said in a report highlighting its long-term view on the sector. "Meeting that demand with lower-emission energy options is vital to making progress toward society's environmental goals."

The oil and gas supermajor said in its long-term outlook report that renewable energy holds "great promise" for the industry, with wind and solar alone expected to account for 11% of the world's total energy supply by 2050. That's five times as high as current levels.

In just the U.S. economy, the pace of growth in renewable energy has been swift. The U.S. Energy Information Administration (EIA) said it expects to see another 27 gigawatts (GW) of power come from solar this year, and another 31 GW next year.

By 2024, renewable energy will account for 25% of total electricity capacity. At the same time, coal-fired power declines as aging plants retire. The EIA estimates coal's footprint on the grid falls from the 20% reached in 2022 to 15% next year.

As such, energy-related emissions of carbon dioxide (CO2), a potent greenhouse gas, are expected to decline 3% in 2023. That said, with fossil fuels still dominating the energy sector, the EIA expects no change in emissions from petroleum and a 1% increase from natural gas, which is expected to account for 40% of total electricity generation in 2024.

The idea that fossil fuels will remain an essential component in the energy sector was echoed in Exxon's outlook, which said oil and natural gas are projected to account for more than half of the world's energy supplies.

"The utility of oil and natural gas in meeting the world's needs remains unmatched," it said. "Given that oil and natural gas are projected to remain a critical component of a global energy system through 2050, sustained investments are essential to offset depletion, as production naturally declines by 5% to 7% per year."

Similar rhetoric on spending and production was expressed by the Organization of the Petroleum Exporting Countries (OPEC), which said the shift in capital flows to low-carbon energy solutions was coming at a time of supply-side shortages.

While shortages stem from production restrictions from OPEC, demand indicators are playing a role as well. The EIA this week showed domestic crude oil inventories cratered by 10.6 million barrels to move 3% below the five-year average for this time of year.

Meanwhile, some of the focus has shifted from the grid to the transportation sector, where greener consumer vehicles are competing against the petroleum needs of long-haul shipping. Exxon said that even with a massive rollout in consumer electric vehicles, oil demand by 2050 would still be equivalent to levels from 2010.

Exxon is playing its part in the energy transition, a role strengthened by its $4.9 billion acquisition of carbon storage specialist Denbury. Exxon expects energy-related carbon emissions will drop considerably by 2050, but it won't be enough to address climate concerns.

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