Natural Gas and Oil – Today and Tomorrow

Mark Green
Posted October 8, 2021

Connecting some of the dots in the U.S. Energy Information Administration’s new International Energy Outlook released this week, we see projections for continued global energy demand growth and increasing use of renewable energy, supported by natural gas and oil out to the year 2050.

EIA’s projections underscore a point we’ve been making for some time – that natural gas and oil are the world’s leading energy sources today and will be tomorrow.

EIA expects that nearly three decades from now natural gas and oil will supply nearly 50% of the world’s energy (compared with 54.7% today).

There are good reasons for that leading role. Natural gas and oil are energy-dense – a lot of energy in a small volume, as in the distance a car can go on just one gallon of gasoline. They’re also versatile and affordable. Natural gas offers a cleaner fuel for electricity generation than some other alternatives while possessing key attributes critical to a healthy electricity grid. Natural gas is the essential partner for the growth of wind and solar, whose intermittency has to be accounted for – as California and Europe have shown recently.

Certainly, renewable energy will have a growing part in the future global energy mix. EIA projects renewables will increase from 14.7% of world consumption today to 26.5% in 2050. Still, for renewables to gain wider use, they should be partnered with natural gas – one of the cleanest, most practical and scalable fueling option for power generation and a strong, stable grid. EIA:

Although new generation will largely be powered by renewables, dispatchable generation sources … will remain important, especially for grid reliability.

This point is especially important given another EIA projection – that global energy demand will rise nearly 50% between now and 2050. The bulk of the demand growth will come from developing nations, and in that respect natural gas is key as countries try to address energy poverty within their borders. And U.S. natural gas production, coupled with U.S. LNG export infrastructure, can all this to happen.

One note about EIA projections. While EIA is the gold standard for compiling energy data and developing nonpartisan analysis, the agency is limited to making projections based on policies and regulations currently in place. As such, EIA cannot anticipate new technologies and innovations that could further reduce emissions, improve the efficiency of operations and more. Of course, constantly developing new technologies and innovating to improve performance is in our industry’s DNA.

For example, we note that EIA’s international outlook projects continued increases in global greenhouse gases based on rising demand – again, based on current policies. Meanwhile, the projection shows U.S. carbon dioxide emissions from energy use never return to 2019 or earlier levels through 2050.

This emphasizes two needs: 1) the need for increased access worldwide to natural gas, which is the chief reason U.S. CO₂ emissions from power generation have decreased to generational lows; and 2) the need for technological breakthroughs that will be especially important for developing nations to reduce their emissions, even as their energy demand rises.

Put another way, the world’s ability to reach climate goals is about reducing emissions in developed countries and providing developing countries with the opportunity to increase energy access with the least emissions possible.

Here at home, we need energy policies that support continued safe and responsible development of American natural gas and oil. These will continue to be the leaders in the energy mix out to 2050. They are the foundation for economic growth, individual opportunity and U.S. energy security.

We should not unilaterally restrict access to American energy reserves – as the Biden administration has threatened to do with its indefinite pause on new federal leasing. We should not hamstring efforts to build needed pipelines and other energy infrastructure. We should not impose punitive tax increases on the natural gas and oil sector that could increase costs, discourage investment and hamper production. We should not curb exports of American natural gas and oil to friends and allies abroad. API Chief Economist Dean Foreman:

Ultimately, much more is at stake if energy policies scuttle the U.S. energy revolution, since the growing U.S. and global economies require even more energy today than they did before the [U.S. energy] revolution began – along with secure, reliable and resilient supply chains. Each of the proposed policy interventions directionally could reduce, rather than enhance, supplies and bring unintended consequences.

EIA’s international outlook sketches the outlines of the world energy mix nearly 30 years down the road. The challenges are clear – but so are the means to address them if the U.S. will carefully develop and responsibly use the natural gas and oil energy it has.