International Energy Agency sees demand rising until 2050, with 2030 peak less likely
Global oil and gas demand could grow until 2050, the International Energy Agency (IEA) said on Wednesday, in a dramatic departure from its previous forecast of a speedy transition to cleaner fuels that would result in oil demand peaking before 2030.
The revised forecast in the World Energy Outlook 2025 reflects the Paris-based group’s belief that the world will likely fail to achieve climate goals. And while electric vehicles could account for 90% of the Chinese market by 2035, the figure in the United States will be only 15%.
As world leaders and scientists gather in Belem, Brazil for the COP30 climate summit, the report will make for sobering reading.
The IEA, which is funded by major Western economies including the US, has been under pressure from Washington for its focus on clean energy policies, as President Donald Trump favours expanding US oil and gas production.
Under the Biden administration, the IEA predicted that global oil demand would peak in this decade, and said no more investment in oil and gas was needed if the world wanted to achieve its climate target.
In September of this year, the agency said that billions of dollars need to be invested in new oil and gas supplies — having previously drawn fire for saying that such investment was incompatible with climate goals. Republican lawmakers in the US have assailed the agency and sought to cut its funding.
The US is the largest contributor to the IEA, whose analysis and data underpin energy policies of governments and companies around the world.
13% gain by 2050
While oil demand was set to plateau or fall this decade in all three scenarios the IEA examined last year, the latest report reintroduces a “Current Policies Scenario” (CPS) in which consumption rises 13% by 2050. The stronger outlook hinges on a slower pace of electric vehicle adoption.
The revival of the CPS after a five-year hiatus marks the latest re-evaluation of oil’s long-term prospects by the agency and the wider energy industry.
“The main reason we have two new scenarios is the growing uncertainties in the political, economy and energy context,” IEA executive director Fatih Birol said on Wednesday from the agency’s Paris headquarters. He pushed back on suggestions that the revival of the CPS was due to US pressure.
The IEA’s latest outlook is consistent with a trend across the energy industry. In September, the oil major BP also pushed back projections that consumption could top out as early as this year.
In addition to CPS, the report continues to include the Stated Policies Scenario (Steps), in which oil demand peaks “around 2030”. The report did not prioritise any pathway as being more likely.
“One major determinant of future oil demand is electrification of the transport sector,” Birol said. “It will depend on government policies.”
Under the CPS, global oil consumption climbs from roughly 100 million barrels per day (bpd) to 113 million in 2050, as the share of EVs in total global car sales broadly plateaus after 2035.
Under Steps, the share of EV sales is projected to double by 2030 and rise above 50% five years later. The CPS scenario posits a drag on growth in wind and solar energy, and a stronger trajectory for natural gas.
Inevitably, the two paths entail different consequences for world oil markets and prices. In the CPS, “higher demand mops up any excess oil and LNG supply more quickly”, bolstering oil prices to about $90 a barrel in 2035. Meeting the demand will require roughly 25 million bpd of new projects — as well as supplies from producers currently subject to sanctions.
Bumpy road to net zero
The demand scenario for oil and gas is further proof the road to net zero by the middle of the century will be bumpier than previously anticipated, with ramifications for the environment.
Global temperatures will rise to almost 3C above pre-industrial levels by the end of the century under CPS, compared with 2.5C in the other pathway. Both options spell a level of climate change that scientists consider extremely destructive, given the 1.5C target that 195 countries agreed on in Paris in 2015.
The CPS is more aligned with the views of the Opec oil producer cartel led by Saudi Arabia, which forecasts that demand for the commodity will keep expanding to 2050. Opec’s secretary-general, Haitham Al-Ghais, has repeatedly assailed the IEA, accusing the agency of promoting an “anti-oil narrative”.