The IEA has revived a scenario in its latest World Energy Outlook (WEO) in which global oil demand keeps rising to 2050, a shift from last year's edition in which all three scenarios showed demand peaking before 2030.
The Current Policies Scenario (CPS), last included in 2019, assumes no new policies or regulations beyond those already in place. Under these conditions, oil demand rises from 100mn b/d in 2024 to 105mn b/d in 2035 and 113mn b/d by 2050. This is closer to Opec's long-term view, which sees demand reaching 123mn b/d by mid-century.
The IEA said it sees value in revisiting CPS now the world has moved past the Covid-19 pandemic and the energy crisis sparked by Russia's invasion of Ukraine. But the agency stressed the CPS is not a "business-as-usual" case, much less a forecast. It said while some technologies are spreading under existing rules, CPS assumes limits — such as weak infrastructure or financing — slow further progress.
The IEA has also updated its Stated Policies Scenario (Steps), which includes announced but not yet implemented policies. This year's Steps has oil demand peaking at 102mn b/d around 2030 and falling to 100mn b/d by 2035, broadly the same as the scenario in last year's WEO. Demand then drops to around 97mn b/d by 2050, versus 93mn b/d in the previous WEO.
The main reason for peak demand in Steps is electrification of road transport in China, where 90pc of passenger car sales are electric by 2035. This pushes Chinese oil demand down to 15.2mn b/d by the middle of the next decade, 1mn b/d lower than in 2024.
India, by contrast, is a key source of growth in both scenarios. Its oil demand rises from 5.4mn b/d in 2024 to 7.4mn b/d in 2035 under Steps, and to 7.8mn b/d under CPS, driven by expanding vehicle ownership and industrial activity.
CPS and Steps diverge on the scale and cost of future oil supply. The IEA notes that oil markets look well supplied in the near term, thanks to rising output from the US, Canada, Guyana, Brazil and Argentina. But in CPS the surplus is quickly absorbed, and prices rise to incentivise new projects, reaching $106/bl in 2050.
Some 25mn b/d of new oil projects are needed by 2035 to keep markets balanced in CPS — 5mn b/d more than in Steps. That gap translates into higher investment needs. Upstream spending in CPS must rise by around $100bn/yr above recent averages, pulling in higher-cost producers and pushing oil prices up by around 10pc compared with Steps by 2035.
In Steps, the peak in oil demand and slower growth in petrochemicals and freight temper the need for new supply. EVs account for more than half of new car sales globally by 2035, curbing road transport oil use.
The IEA also retains its Net Zero Emissions (NZE) scenario, included in the 2024 WEO, which maps a pathway to limit global warming to 1.5°C. Unlike CPS and Steps, NZE is a normative scenario, showing what would be required to reach net zero energy-related CO2 emissions by mid-century. Under this scenario, oil prices fall to $33/bl by 2035 and $25/bl by 2050, as consumption plummets and supply becomes concentrated among low-cost producers. Opec+ countries' share of global oil supply rises to around 55pc by 2035 in NZE, as higher-cost producers exit the market.
