The International Energy Agency further tempered its stance on an imminent peak in oil demand, reinstating a scenario in which global consumption keeps growing to the middle of the century.
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” – or CPS – in which consumption rises 13 percent by 2050. The stronger outlook hinges on a slower pace of electric vehicle adoption.
The revival of CPS after a five-year hiatus marks the latest revaluation of oil’s long-term prospects by the agency and the wider energy industry. It also comes at a time when the White House is held by an administration that both champions fossil fuels and attacks renewable energy sources.
Forecasts from the Paris-based IEA – established following the 1973 oil shock – are used globally as a benchmark by governments and energy companies for planning policy and investments. The agency’s analysis may provide sobering reading for delegates gathering in Brazil this week for the United Nations-sponsored climate talks known as COP30.
The report on Wednesday is another shift in tone for the agency, which in September 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 have assailed the agency and sought to cut its funding.
The IEA’s latest outlook is consistent with a trend across the energy industry. In September, BP Plc 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, or STEPS, in which oil demand peaks around 2030. The report didn’t prioritize any pathway as being more likely.
“One major determinant of future oil demand is electrification of the transport sector,” Executive Director Fatih Birol said in a phone interview from the agency’s Paris headquarters. “It will depend on government policies.”
Electric Vehicles
In CPS, global oil consumption climbs from roughly 100 million barrels a day to 113 million in 2050, as the share of EVs in total global car sales broadly plateaus after 2035. In STEPS, the share of EV sales is projected to double by 2030 and rise above 50 percent five years later. The CPS scenario poses 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 barrels per day of new projects, and supplies from producers currently subject to sanctions.
The demand scenario for oil and gas is further proof the road to net zero by the middle of the decade 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 in CPS, compared with 2.5C in the other pathway. Both options spell a level of climate change that scientists consider extremely destructive.
Later Peak
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.”
Even within the IEA’s less bullish scenario, STEPS, the peak for oil demand is now seen slightly later, arriving “around 2030,” rather than before the end of this decade, as envisaged in last year’s analysis. It sees oil consumption averaging 96.9 million barrels a day in 2050, up from the previous estimate of 93.1 million barrels a day.
No matter which outlook is ultimately proven right, the world must grapple with an array of risks spanning sanctions on oil, uncertainty over Russian natural gas supplies and the risk of cyber-attacks on electricity infrastructure, Birol said.
“Global energy security faces an unprecedented range of threats in a way that we have never seen before,” he said.
