IEA Reverses Tone On Fossil Fuels, Sees Oil Demand Climbing Till 2050

• The IEA projected that the share of EVs in total car sales could plateau after 2035 at around 40%, and petrochemical feedstocks, aviation, and trucks could drive oil demand.
• However, the IEA also kept the Stated Policies Scenario, or STEPS, under which oil demand will peak around 2030.
• Republicans in the U.S. have criticised IEA for its previous projections and threatened to pull funding from the agency, which counts the U.S. as its biggest backer.

The International Energy Agency reintroduced a scenario in its forecast, projecting that oil demand will continue to rise until 2050, marking an extraordinary shift in tone toward fossil fuels.

The Paris-based IEA reintroduced the “Current Policies Scenario,” or CPS, under which oil consumption grows by 13% by 2050, aided by weak adoption of electric vehicles without policy support.

What Is The CPS Forecast?

The CPS is based on existing policy and regulations and does not take into account policy proposals. IEA began omitting the scenario in 2020 in favor of those that consider policy proposals. Last year, oil demand was supposed to peak by 2030 across all three scenarios.

The agency projected that oil demand could rise to 113 million barrels per day (mbpd) in 2050, from around 100 mbpd at present levels. The bet is based on tame demand for electric vehicles over the next decade. The IEA projected that the share of EVs in total car sales could plateau after 2035 at around 40%, and petrochemical feedstocks, aviation, and trucks could drive oil demand.

According to CPS, oil markets are well supplied in the near term, thanks to robust production in the Americas; however, demand may soon outpace supply. Some 25 mbpd of new oil supply projects are needed by 2035 in this scenario to keep markets in balance, the IEA said.

“There are many uncertainties today—economically, politically, and technologically,” IEA Executive Director Fatih Birol said to the Wall Street Journal. “We want to have a broader range of scenarios to try to address all of these uncertainties, and I hope it will meet the demand of our leaders, our governments, industry, and other stakeholders.”

However, the IEA also kept the Stated Policies Scenario, or STEPS, under which oil demand will peak around 2030. It also did not mention whether any of the scenarios are more likely.

IEA Partially Realigns With Oil Majors, OPEC+ Amid US Criticism

The IEA was founded in 1973 following the oil shock and backed by top consumers. The firm’s predictions help countries develop long-term energy policies. Its more conservative predictions about fossil fuels have often drawn the ire of OPEC+ countries and the Trump administration.

The OPEC+ oil producer group, led by Saudi Arabia, also believes that oil demand will continue to rise till 2050. The group’s secretary-general, Haitham Al-Ghais, has previously accused the agency of promoting an “anti-oil narrative.” At the same time, Republicans in the U.S. have also criticised IEA and threatened to pull funding from the agency, which counts the U.S. as its biggest backer.

The IEA’s move alongside several other new forecasts by the likes of BP, which erroneously predicted that oil demand had peaked in 2020, comes amid a renewed global push for fossil fuels spearheaded by the Trump administration, which has also rolled back several renewable energy incentives.

Renewable Energy To Still Grow

The IEA, however, still projected that renewable energy would grow faster than any other major energy source across all scenarios, led by solar photovoltaics (PV). In the CPS, where they face bigger problems, renewables still meet the largest share of total energy demand growth, followed by natural gas and oil, even though annual solar PV additions in the power sector stall at around today’s levels of 540 GW to 2035.

Despite roadblocks in the U.S., much of the growth is expected to come from China, which continues to be the largest market for renewables, accounting for 45-60% of global deployment over the next 10 years across the scenarios.

What Are Stocktwits Users Thinking About Oil Firms?

Retail sentiment on Stocktwits about Exxon Mobil was in the ‘bullish’ territory at the time of writing, while traders were ‘bearish’ on Chevron.

Exxon stock has gained 10.6% this year, while Chevron shares have risen 7.4%.

Also See: Why Did Venture Global Stock Rise Over 4% After-Hours?

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