The International Energy Agency (IEA) has delivered an unexpected update: global oil consumption could keep increasing through 2050, challenging years of assumptions about a near-term peak in fossil fuel demand. Despite rapid growth in renewable energy and electric vehicles, the agency’s latest World Energy Outlook suggests that developing economies’ industrialization and rising transport needs will offset gains from cleaner energy sources.
The IEA’s Surprising Revision
For policy makers, investors, and climate advocates, the IEA’s 2025 World Energy Outlook represents a sobering recalibration of expectations. The Paris-based energy watchdog has reinstated its “Current Policies Scenario” (CPS)—a projection framework abandoned during the pandemic in 2020—which now shows oil demand climbing to 113 million barrels per day (mb/d) by 2050, a 13% increase from current consumption levels of approximately 100 mb/d.
This marks a dramatic departure from recent IEA forecasts. Until this year, all the agency’s modeling assumed fossil fuel consumption would peak this decade. The shift reflects not just changing market realities, but also mounting political pressure, particularly from the United States under the Trump administration, which has advocated for expanded fossil fuel production. Under the previous Biden administration, the IEA had projected peak oil demand this decade and suggested minimal new investment in oil and gas would be needed to meet climate targets.
The agency now presents three distinct scenarios. In the CPS, which assumes existing policies remain unchanged without additional climate action, both oil and natural gas demand continue growing to mid-century, though coal begins declining before 2030. The “Stated Policies Scenario” (STEPS), which considers proposed but not yet adopted policies, shows oil demand flattening around 2030 at 102 mb/d before beginning a slow decline. Meanwhile, the “Net Zero Emissions by 2050” (NZE) scenario maps an ambitious pathway requiring transformational change—but one that, given recent emissions trends, now inevitably involves overshooting the 1.5°C warming target for several decades.
Key Drivers Behind Continued Oil Growth
The Asian Energy Appetite
The geographic center of oil demand growth is shifting decisively eastward. While China dominated global oil demand increases over the past decade—accounting for more than 75% of growth—India is now emerging as the primary driver of future consumption. The IEA projects India’s oil use will surge from 5.5 mb/d in 2024 to 8 mb/d by 2035, representing the largest single-country increase globally.
This growth stems from India’s rapid economic expansion, with GDP projected to grow over 6% annually through 2035. Rising car ownership, urbanization, and middle-class expansion are driving transportation fuel demand, while increased consumption of plastics and chemicals, aviation growth, and expanded use of liquefied petroleum gas (LPG) for cooking all contribute to the upward trajectory. Southeast Asia follows similar patterns, with both regions accounting for the lion’s share of global demand growth in the coming decades.
The Petrochemical Factor
Perhaps the most significant and least understood driver of future oil demand lies in petrochemicals—the production of plastics, fertilizers, and chemical feedstocks. The IEA’s analysis reveals that petrochemicals are set to account for more than a third of oil demand growth to 2030, and nearly half by 2050. This surpasses projected growth from trucks, aviation, and shipping combined.
Advanced economies currently use up to 20 times more plastic per capita than developing nations, underscoring enormous potential for growth as emerging economies industrialize and living standards rise. Even as electric vehicles displace oil in transportation, the resilience of petrochemical demand—where cost-effective substitutes for oil feedstock remain limited—ensures continued crude consumption growth.
The EV Reality Gap
While electric vehicle sales are growing, the pace remains insufficient to dramatically curtail oil demand in the near term. In the CPS, the share of EVs in new car sales plateaus at around 40% by 2035—well below the levels needed to peak oil demand. Infrastructure limitations, higher costs, and policy uncertainties in emerging markets slow adoption rates, particularly in the regions experiencing the fastest demand growth.
The STEPS scenario, which assumes more supportive policies, projects EVs reaching over 50% of new car sales by 2035, sufficient to flatten oil demand around 2030. However, this still requires significant policy intervention and technological cost reductions beyond current trends.
Aviation’s Resurgence
The aviation sector presents another challenge to demand reduction. As global air travel recovers from pandemic disruptions and expands with rising middle-class populations in Asia, jet fuel demand continues climbing. Unlike ground transportation, aviation faces significant technical barriers to electrification, making it heavily dependent on either conventional jet fuel or expensive sustainable aviation fuels that currently lack scale.
Implications for Climate Policy
Collision with Paris Agreement Goals
The climate implications of extended oil dependence are stark. The IEA’s Current Policies Scenario points toward global warming of almost 3°C by 2100, while even the more optimistic Stated Policies Scenario would result in approximately 2.5°C of warming—both well above the Paris Agreement’s “well below 2C” goal, let alone the aspirational 1.5°C target.
Annual global energy-related CO₂ emissions reached a record 38 gigatonnes in 2024. Under current policies, emissions would remain around this elevated level through 2050, meaning meaningful climate stabilization remains out of reach. Even in the STEPS, emissions would only fall to around 30 gigatonnes by mid-century—insufficient for meeting global climate commitments.
Most troubling is the IEA’s acknowledgment that exceeding the 1.5°C threshold is now “inevitable” across all scenarios. Only under the Net Zero Emissions pathway—which requires unprecedented transformation in energy systems and large-scale deployment of currently unproven carbon removal technologies—would warming eventually decline below 1.5°C by 2100, after overshooting for several decades.
COP30 and NDC Challenges
The IEA notably dropped its “Announced Pledges Scenario” from this year’s outlook, citing insufficient submissions of updated Nationally Determined Contributions (NDCs) covering 2031-2035. This absence itself signals weakening global climate ambition. Countries were expected to strengthen their commitments ahead of upcoming climate negotiations, yet many have delayed or avoided more aggressive targets.
As nations prepare for COP30 and subsequent climate summits, the gap between stated ambitions and actual policies grows wider. The IEA’s Executive Director Fatih Birol emphasized the disconnect: “The energy transition is happening, but not fast enough to meet our climate goals.”
Government and Investor Reactions
The revised outlook forces difficult conversations about realistic climate pathways. Governments face pressure to either dramatically accelerate clean energy deployment and efficiency measures, or acknowledge that current policy frameworks are inadequate for meeting international commitments.
For regulators, the findings suggest that existing carbon pricing mechanisms, renewable energy mandates, and vehicle emission standards require substantial strengthening. Yet political resistance to aggressive climate policies remains substantial, particularly as energy costs and inflation concerns dominate public discourse in many democracies.
Market and Investment Impact
Oil Majors’ Strategic Response
For major oil producers, the IEA’s revised scenarios provide validation for continued upstream investment. The Current Policies projection of 113 mb/d by 2050 suggests the oil industry remains viable for decades, potentially justifying capital expenditure on new fields and infrastructure.
However, even the CPS shows a dramatic shift in the oil demand mix. Petrochemical feedstocks and aviation emerge as growth sectors, while traditional road transport faces long-term decline. This necessitates strategic repositioning: oil companies may need to integrate downstream into petrochemical value chains or develop partnerships with chemical manufacturers to capture growing segments of demand.
The supply-side dynamics also matter. The IEA estimates that maintaining current production levels through 2050 requires approximately 45 million barrels per day from new conventional oil fields, plus continued investment in unconventional resources. Without sustained capital deployment, natural field decline rates—averaging 6-8% annually for mature fields—would rapidly erode production capacity.
Energy Diversification in Producer States
For OPEC and non-OPEC oil-producing nations, the outlook presents both opportunities and risks. Short-to-medium-term demand growth supports fiscal planning and economic stability for petroleum-dependent economies. Saudi Arabia, the UAE, and other Gulf states can continue leveraging oil revenues while gradually developing economic diversification strategies.
However, the inevitability of eventual demand contraction—whether in 2030 under the STEPS or later under the CPS—means producer nations cannot indefinitely delay economic transformation. Norway, Saudi Arabia’s Vision 2030, and the UAE’s green energy initiatives represent attempts to prepare for post-oil futures, even as near-term revenues remain robust.
ESG Investing at a Crossroads
The IEA’s revised outlook creates acute challenges for Environmental, Social, and Governance (ESG) investors. The growing recognition that oil demand may not peak until mid-century undermines the rationale for blanket fossil fuel divestment strategies that assumed rapid industry decline.
ESG portfolios now face difficult choices. Categorical exclusion of oil and gas companies may mean missing profitable investment opportunities over the next two decades, while continued exposure to fossil fuels invites criticism from climate-focused stakeholders. Some investors are shifting toward “engagement” strategies—maintaining stakes in energy companies while pushing for emissions reduction, renewable energy diversification, and responsible transition planning.
The tension is particularly acute for pension funds and institutional investors with long time horizons. If oil demand genuinely extends to 2050, traditional energy companies may generate substantial returns, but climate risks—both physical impacts and policy changes—could materialize faster than market prices reflect. The appropriate balance between transition risk management and financial returns remains hotly debated.
Outlook: Balancing Realism and Sustainability
What “Managed Decline” Might Look Like
Even if oil demand peaks post-2030 or continues growing to 2050, the composition of that demand matters immensely for climate outcomes. A managed approach would prioritize several elements:
First, accelerating the displacement of oil in sectors with viable alternatives. Electric vehicles, heat pumps, and renewable electricity can feasibly replace fossil fuels in passenger transport, home heating, and power generation within current technological paradigms. Policies supporting these transitions—including infrastructure investment, subsidies, and regulatory standards—represent low-hanging fruit for emissions reduction.
Second, accepting that certain applications, particularly petrochemicals and aviation, currently lack cost-effective substitutes. Rather than pursuing unrealistic near-term elimination, focus could shift to improving efficiency, developing sustainable alternatives at scale, and preparing for long-term substitution as technologies mature.
Third, recognizing that emissions reductions need not perfectly track fossil fuel consumption. Carbon capture and storage, though controversial and still limited in deployment, could theoretically allow continued fossil fuel use while reducing emissions. The feasibility and cost-effectiveness of this approach remain uncertain, but it represents a potential bridge toward lower emissions even with sustained oil demand.
Economic Growth vs. Decarbonization Speed
The IEA’s scenarios illuminate a fundamental tension. Developing nations, particularly in Asia, view energy access and economic growth as immediate priorities. India’s government has pledged net-zero emissions by 2070—two decades later than most developed countries—reflecting both its development imperatives and the principle of differentiated responsibilities embedded in climate agreements.
Asking emerging economies to forgo fossil fuel-enabled industrialization that wealthy nations used for their own development raises profound equity questions. Yet the cumulative nature of climate change means that total global emissions, not their geographic distribution, determine atmospheric CO₂ concentrations.
Finding pathways that allow economic advancement in developing nations while avoiding catastrophic warming requires technology transfer, financial support from developed countries, and policy innovation that makes clean energy economically superior to fossil alternatives. Current mechanisms under the Paris Agreement, including climate finance commitments, have fallen short of the scale needed to catalyze this transformation.
Can Policy Innovation Still Bend the Curve?
The IEA’s outlook should not be read as deterministic. The Current Policies Scenario explicitly assumes no new climate policies beyond those already implemented, while the Stated Policies Scenario considers only those formally proposed. Both represent reference points, not inevitable futures.
History demonstrates that energy systems can transform faster than conventional wisdom suggests. Solar photovoltaic costs have plummeted 89% since 2010, exceeding even optimistic projections. Battery costs for electric vehicles have fallen similarly, making EVs cost-competitive with internal combustion vehicles in many markets.
Policy breakthroughs could still alter trajectories significantly. Carbon pricing mechanisms that create genuine economic incentives for low-carbon choices, industrial policy supporting strategic sectors like green hydrogen and sustainable aviation fuels, and international cooperation on technology development could all accelerate transition timelines.
The IEA’s revised scenarios underscore that the energy transition is occurring—renewable energy capacity additions continue breaking records, electric vehicle sales grow, and coal demand has likely peaked globally. The critical question is not whether the transition happens, but whether it proceeds fast enough to avoid the most severe climate impacts.
Bottom Line
The IEA’s acknowledgment that oil demand may continue growing through 2050 represents an uncomfortable truth: current policies and technologies are insufficient for meeting global climate goals. This is not an argument for abandoning climate action, but rather a recognition that vastly accelerated efforts are required.
For energy investors, the message is one of complexity. The fossil fuel industry may remain viable longer than recent projections suggested, but transition risks are real and intensifying. For policy makers, the urgency of strengthening climate policies is clearer than ever—the gap between aspirations and likely outcomes continues widening.
The energy transition is no longer theoretical; it is underway. But the IEA’s 2025 World Energy Outlook confirms that hoping for rapid fossil fuel obsolescence is not a strategy. Meeting climate goals will require confronting hard truths about development, equity, technology readiness, and political will—and acting accordingly with unprecedented speed and scale.
