IEA sees global oil demand rising until 2050 under current policies

It could be another quarter of a century before the world reaches peak oil demand under the current policy climate, the International Energy Agency said Nov. 12, citing shifting US decarbonization goals, rapid growth in electricity consumption and slowing adoption of electric vehicles as factors shaping its revised long-term outlook.

Based on current policies and regulations, the IEA projects that global oil consumption will continue to increase through 2050, with oil prices expected to exceed $100/b by that year.

Global oil demand, including biofuels, could increase from 100 million barrels in 2024 to 105 million barrels by 2035, and may rise further to 113 million barrels by 2050, according to the organization, which advises economies on energy policies.

Although the IEA anticipates a short-term supply surplus of more than 3 million b/d in the global oil market, declining production from mature oilfields could pose a growing investment challenge if demand proves more resilient than expected.

"Declines in production from existing fields and continued growth in consumption run through today's overhang of oil supply relatively quickly," the IEA said in its report, estimating that the world will need the equivalent of an additional 25 million b/d in new projects over the next decade to maintain market equilibrium.

That view marks a departure from the base case presented in the IEA's previous annual World Energy Outlook, which indicated that the risk of underinvestment had "receded" due to bearish indicators suggesting a 2030 oil demand peak.

The shift reflects a pivot to reinstate a "current policies scenario," or CPS, in this year's report, which incorporates a more conservative forecast for environmental regulations. In its last five editions of the World Energy Outlook, the IEA had projected a "stated policies scenario," or STEPS -- a broader measure reflecting existing policies as well as those yet to be formally adopted.

Under the latest STEPS, the IEA continues to anticipate that oil demand could plateau around 2030, but projects that global consumption in 2035 will be 1.3 million barrels higher than estimated in its previous report.

The new methodology reflects increasing uncertainty regarding future regulations and countries' resolve to meet climate targets, the IEA said. As a result, this year's report omits the traditional "announced policies scenario," which is based on national climate goals.

Over the last year, the US has notably withdrawn from the Paris Agreement, which has curbed spending on renewables and the electrification of the transport fleet, according to the IEA. Meanwhile, the organization has attracted criticism from the Trump administration, which has opposed narratives advocating for a phaseout of fossil fuels.

Under the STEPS view, changes in US policy could result in 30% less renewable capacity being installed over the next decade compared with projections in the previous World Energy Outlook, the IEA said. Over the same timespan, the number of EVs on US roads may be 60% lower than previously anticipated, according to the agency.

'Thirst for energy'

The updated forecasts come after a year of record-breaking energy consumption across all fuel types in 2024, driven by rising air conditioning demand, as well as increased fossil fuel use in emerging economies.

"The world remains thirsty for energy," the report said. According to IEA estimates, global energy demand rose by more than 2% in 2024, surpassing the 1.4% average annual growth recorded between 2010 and 2023.

Fossil fuels accounted for nearly four-fifths of total energy demand -- a proportion that has remained largely unchanged over the past 25 years, according to the IEA.

Under CPS, total energy demand is projected to rise by another 90 exajoules, or 15%, by 2035, while STEPS forecasts a slower growth rate of 8%, according to the IEA. In contrast, achieving net-zero emissions by 2050 would require a decline in energy consumption over the next decade, the IEA said.

Growth engines

Increasingly, consumption growth is expected to be driven by emerging economies outside China, which accounted for more than half of the world's oil and gas growth between 2010 and 2024, but has since surpassed peak production in its energy-intensive industries, according to the IEA.

Although no single country is increasing its energy use at the pace previously seen in China, nations such as India and Indonesia are set to grow their consumption by over 3% per year over the next decade, contributing to robust aggregate expansion, the IEA said.

Under CPS, emerging economies account for 90% of the growth in energy demand, primarily driven by petrochemical feedstocks, aviation and trucking, according to the report. The buildings sector has also been a consistent source of energy demand growth, contributing an additional 1 Ej every year since 2010, the report said.

EV adoption remains a key factor in determining the pace of the transition, the IEA said. Under CPS, the share of EVs in the global car market doubles to roughly 40% before leveling off around 2035. In contrast, STEPS projects EV penetration to reach 50% by the same year, suggesting broader implications for the displacement of oil demand.

Despite waning demand in the US, higher Chinese EV sales have contributed to a reduced market share for diesel- and gasoline-powered vehicles, the IEA said. Sales of internal combustion engine vehicles declined 1.5% in 2024 and are now nearly 25% below their 2017 peak, in stark contrast to a fivefold increase in EV sales between 2020 and 2024, according to the IEA.

Net-zero uncertainty

The organization continues to model a net-zero 2050 scenario in its annual report, but warns that achieving this target may be increasingly out of reach.

"It is now all but certain that 1.5 [degrees Celsius] of warming will be exceeded within a decade or less," the report said, adding that remaining within 1.5 C of pre-industrial temperatures would require a "high overshoot" in the near future.

In 2024, mean global surface temperatures were recorded at 1.55 C above pre-industrial levels, marking it as the warmest year on record, according to the IEA.

The IEA said it plans to publish its announced policies scenario at a later date, once it has gathered a "more complete picture" of relevant country-level pledges.