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The world is steadily moving toward a time when oil may no longer clearly be the largest source of energy. Technology, policy and environmental concerns may push the historic king off the throne.
The period between 2015 and 2040 will usher in a remarkable transformation of people’s relationship with energy. Petroleum products have enjoyed dominance because of their inherent ability to efficiently store energy. As of 2010, oil provided 32 percent of global energy demand. Coal and gas were relatively close behind at 28 percent and 21 percent respectively.
By 2040, the traditional hierarchy will likely be upended by four factors: price differentials, environmental concerns, technological improvements and energy security. As soon as the 2030 timeframe, it is unlikely that any one energy source—be it oil, gas, coal, nuclear, renewables, hydro, biofuels or biomass—will account for more than 30 percent of the global market.

In 2014, oil will deliver 28 percent of global energy, but the balance has tipped. The potential for increased gas use in transportation and electricity generation will diminish the predominance of oil. Non-fossil energy sources will grow to satisfy 25 percent of needs.
The cost of energy will play a role in this transition, but so too will geopolitics. Changing relationships among major powers will influence investment trends. Environmental concerns will also play a part. With the impact of climate change, countries will more urgently address greenhouse gasses and emissions. As more countries develop and use additional energy, they will encounter what is called the "pollution paradox," in which rising living standards create the means to address pollution problems and subsequently reduce the use of fossil fuels. All of these changes will still leave much work to complete, but the conditions will be far more conducive to success than those of the present.
Jim Burkhard is vice president and head of Global Oil Market Research and Energy Scenarios, IHS Energy
Posted December 5, 2014

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