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Oil giant Exxon Mobil’s (XOM - Free Exxon Mobil Stock Report) annual publication of its long-term view for energy supply and demand draws well thought out conclusions that investors should consider when constructing their portfolios.

To begin with, 35% more energy is projected to be consumed over the 25-year horizon to 2040, translating to an average annual increase in energy demand of 1%. One might wonder why energy demand is only expected to grow at what at face value seems a comparatively slow 1% a year. The reason is that increasingly efficient automobile engines, appliances, and buildings will be a significant offset, notably in mature industrial regions, such as Europe and North America. Without the projected efficiency gains, global energy demand would likely expand by 140%. But even a 1% annual rise off of an extremely large existing base is meaningful, and will lead to trillions of dollars of investment in the coming two and a half decades.

Two main factors will drive demand: economic progress and population growth. The global economy is estimated to expand at close to 3.0% a year over the very long term, with much of the buildup supplied by developing nations. Ten key growth nations are expected to take up a more sizable portion of the energy market, owing to their rising populations and living standards. China and India head the list, which also includes Brazil, Mexico, South Africa, Nigeria, Egypt, Turkey, Thailand, and Indonesia.

It is also expected that two billion more people will be living in 2040, bringing total global population to nine billion. About 40% of that rise is thought to come from the ten key growth countries, although China may only experience modest expansion. In short, the world will need massive amounts of fresh fuel to support the trends in economic and population growth. That suggests long-term investors should consider an allocation in shares of companies whose fortunes are tied to rising energy demand.

Shifts in the supply mix are expected. By 2040, oil’s portion of total energy supplied is forecast to ease a bit, from 34% in 2010, to 32%, but its percentage is still expected to be the largest. The big switch is predicted to be toward natural gas, from 22% to 26%, and away from coal, from 26% to 19%. The relatively clean-burning aspect of natural gas and its newfound abundance make it the favored fuel over coal for electricity generation in the long run. Nuclear and hydro fuels will also become more prominent in the mix, according to Exxon.

One of the more uplifting observations arising from the Exxon study is that North America will likely become a net energy exporter by 2020. That is not to say the region will be energy independent, particularly in the case of oil. But growth in unconventional oil and natural gas in the United States, plus the oil sands in Canada, is expected to lead to net exports from North America in about five years. These close-to-home assets are making the United States less vulnerable to the periodic energy crises that have bedeviled the economy over the past five decades.

Thinking long term isn’t always easy in these days of online access and instantaneous communications. But the world does change over time. Thirty years ago, for instance, China was an afterthought in the scheme of the global economy, and today it has the world’s second largest gross domestic product. On the downside, Japan was in the midst of a major boom in the 1980s that made its business practices among the most admired, but that island nation’s economy subsequently fell into a dormant state from which it has only recently shown signs of awakening. An important shift in the global economy out to 2040 stands to be the increasing prominence of Asian nations, and their booming populations will require ever more fuel. 

One place to look for companies that stand to benefit from positive long-term energy demand trends is the integrated petroleum industry. Shares of financially strong Exxon Mobil, Royal Dutch Shell (RDSB), and Total (TOT) can usually be owned for extended time horizons, and provide good current income along the way. Another place to look is the maritime industry where, for example, shipper Kirby Corp. (KEX) has good long-term possibilities.

Of course, the drilling business is coming off a period of extra heavy investment in oil and natural gas field development in the United States that has led to supply outpacing demand requirements. But less projected spending on drilling ventures for a few years should create a more balanced backdrop with respect to the energy markets, and provide an opportunity for long-term investors.

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.