IEA: “Global oil demand will peak before 2030”

Global demand for oil is set to peak before the end of the decade, as energy markets enter a period of increased supply, according to the International Energy Agency (IEA).

Speaking at the launch of the intergovernmental energy body’s annual report, Fatih Birol, executive director of the agency, warned that the industry was on the brink of major changes driven by the scaling up of energy production.

Peak oil demand

“A huge wave of LNG is going to hit the market in 2026, mainly coming from Qatar and the US, where we see most growth,” Birol said. This would lead to a 50% increase in available export capacity by the end of 2030, the IEA predicts.

There has also been significant expansion in new oil projects in the US, Canada, and South America, despite IEA warnings that no further expansion of oil production is needed if the world is to meet its net zero targets.

As of 2023, two-thirds of energy demand is still met by fossil fuels.

Global oil prices are currently above $80 per barrel, with relatively higher prices driven by geopolitical tensions in the Middle East. US oil producers estimate that the breakeven price for Permian oil production is between $50 and $54 per barrel, according to the US Energy Information Administration.

While the scaling up of production capacity is good news for consumers, who are expected to enjoy a fall in energy prices, it could become a challenge for clean energy producers who will have to compete against cheap fossil fuels, Birol warned.

Despite the increase in fossil fuel output, the IEA also predicts that global emissions will fall soon. In most developed markets, they are already declining, but the pace of change needs to be accelerated, Birol added.

The age of electrification

Changing forces on the demand side could become a key factor in the global energy transition, Birol predicts. “Global oil demand will peak before 2030. While we will still use oil for many years to come, we expect a weakening of demand, mainly because of changes in the transportation sector,” he argued.

The IEA estimates that by the end of this year, 20% of all cars globally will be electric vehicles. This shift is already evident in China, where more than half of all cars are now electric. By 2030, more than half of all cars globally are expected to be electric. Birol describes this shift as the transformation from an era of coal to fossil fuels to the new age of electrification. 

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The IEA's forecasts differ dramatically from those provided by major oil producers. Exxon Mobil for example operates on the assumption that global oil prices will remain steady until at least 2050.

Capital flows

Global capital flows indicate that investors have clearly made the shift. More than $2trn is now invested in clean energy projects annually, nearly double the amount spent on fossil fuels.

The IEA predicts that renewable power generation capacity will rise from 4,250 GW today to nearly 10,000 GW by 2030. This figure is just short of the targets set at last year’s COP28 summit, but according to the IEA, it is enough to meet global electricity demand and push coal-fired generation into decline.

However, the Paris-headquartered intergovernmental body also warns that geopolitical risks pose significant challenges. For example, around 20% of today’s global oil and liquefied natural gas (LNG) supplies flow through the Strait of Hormuz, a maritime chokepoint in the region.

The IEA also used its outlook to warn of potential bottlenecks in the commodities needed to build renewable energy infrastructure required. While it described , "impressive growth" in lithium nickel cobalt extraction, the IEA warned that there were significant gaps between supply and demand in the copper market. 

Timing peak oil: are we heading for a delayed or timely transition?