IEA’s bullish oil outlook is a nod to Trump, wake-up call for world

The IEA's annual World Energy Outlook, published on Wednesday, maps out different trajectories for energy demand through 2050. This release is normally a pretty mundane affair, but not this year, as the outlook has become a political football.

Officials in U.S. President Donald Trump’s administration have accused the Paris-based watchdog of politicising energy by suggesting that demand for fossil fuels could plateau by 2030. Energy Secretary Chris Wright has called peak oil demand "nonsensical".

It is therefore notable that the 2025 report introduced a new scenario showing that, given current government policies, oil demand will not plateau in 2030 but will instead hit 113 million barrels per day by mid-century, up around 13% from 2024 consumption.

TROUBLING MESSAGE ON GLOBAL WARMING

The “existing policies” baked into the Current Policy Scenario (CPS) range from renewables mandates and fossil fuel extraction laws to construction and vehicle emission standards.

The CPS, which appears to be the base scenario among several IEA projections, "offers a cautious perspective" on the speed of adoption of new technologies and therefore assumes a bigger role for fossil fuels in the coming decades.

Former critics of the IEA may hail this about-face as a much-needed dose of reality to counter the organisation's previous green leanings. And, to be fair, previous scenarios probably were overly optimistic about the implementation of climate-friendly policies and the shift away from fossil fuels.

But political matters aside, the message CPS is sending is troubling.

It points towards a 2.9 degree Celsius rise in temperatures above pre-industrial levels by 2100, far exceeding the 1.5 degree target which scientists say is needed to avoid the most catastrophic impacts of climate change.

If that’s right, the world is in big trouble.

QUESTIONABLE ASSUMPTIONS UNDERPIN CPS

The CPS is underpinned by some highly questionable assumptions, however.

First, it presumes recent technological leaps that led to sharp declines in the cost of batteries, electric vehicles and renewables will largely stagnate and even decline in some countries through 2035. It also assumes efficiency gains to internal combustion engines will moderate after 2035, slowing a multi-decade trend.

At the heart of the CPS's bullish oil demand outlook is a highly conservative assumption about the growth rate of EV sales, which accounted for 25% of new car sales globally in 2025, up from 5% in 2020.

Projections related to autos matter enormously to the broader energy outlook because road transportation is responsible for around 45% of global oil use today.

While the CPS projects that electric car sales will continue to grow rapidly in China and the European Union to reach 90% of all auto sales by 2035, it also assumes that EV market share will flatline at around 15% in other countries such as the United States and India.

While it is true that EV adoption in the U.S. did slow in the past year, partly due to the elimination of subsidies, extrapolating from that when projecting future demand is tough to justify when EVs are becoming cheaper globally and the technology is improving.

Are U.S. consumers really going to stick with an outdated technology as a new one becomes ever more affordable?

Moreover, the CPS assumes gasoline and diesel consumption will continue to grow into 2050, which would require investment in new refining capacity. But that type of capital-intensive investment is unlikely unless oil prices rise and remain elevated for a meaningful period.

Of course, higher gasoline prices would make internal combustion cars less competitive against battery-powered vehicles.

Overall, the CPS appears rooted in the belief that barriers preventing the development and adoption of low-carbon technologies will only grow. Given the enormous investments in these fields globally – investments in clean energy technologies worldwide are set to reach US$2.2 trillion in 2025 - the boost expected from artificial intelligence and the push for greater energy security, such assumptions are a bit head-scratching.

NET ‘ZERO HOUR’?

The IEA is justified in acknowledging the political and economic realities that have kept the world from meeting its various climate pledges. In particular, the agency is right to point out that the climate agenda has slowed in recent years in the wake of the energy price shock that followed Russia's invasion of Ukraine in 2022. The focus has clearly shifted from energy transition to energy security.

The United States also dealt a heavy blow to the energy transition efforts after President Trump pulled the country out of the 2015 Paris climate accord on the first day of his second term. He has since scrapped many of his predecessor's flagship green policies and regulations.

But none of this changes the fact that the energy transition is an economic necessity, as the overwhelming scientific consensus indicates that the rising costs of preventing the effects of climate change dwarf the costs of deploying new technologies for cleaner energy.

As world leaders and scientists gather in Belem, Brazil for the COP30 climate summit, the IEA's outlook will make for sobering reading.