There has been a keen debate among analysts in recent years about when we will see peak demand for oil. The debate arose from the global political consensus that measures to tackle climate change were gaining strength and that an energy transition was underway.
We now see that measures to tackle climate change are faltering and that there is only a limited energy transition. In many countries, governments have been elected that are less committed to tackling climate change than their predecessors, and even where a commitment remains, political and fiscal pressures are weakening their resolve. While in many countries there are impressive changes to the pattern of energy consumption—for example, the rise of electric vehicles in China to a 60% share of sales—the share of fossil fuels in final energy consumption is about 82% today, little changed from the 85% seen 50 years ago. We are in a world of energy addition, not energy transition.
Oil continues to play the biggest role in the energy mix. The political consensus around climate change measures led to an influential view that peak demand is in sight. But this is not a unanimous view.
There are broadly three schools of thought on peak oil: first, most prominently represented by the IEA, is the view that sees demand peaking by the end of the decade; second, there is a view, best expressed by OPEC, that sees demand essentially never peaking, at least not before 2050; and third, there is a mix of views that see oil demand remaining close to today’s levels well into the 2030s and possibly beyond. Some major oil companies, such as BP and ExxonMobil, take this view.
Those who, like the IEA, believe demand will peak earlier base their analysis on the assumption of a successful implementation of policies set out by governments. This is easy to believe when milestones lie some way in the future, but as we get closer to the moment of truth for forecasts, we find policy expectations are not surviving contact with the real world. So confident were supporters of the early peak demand case that in the 2020 edition of its World Energy Outlook, the IEA deleted its Current Policies Scenario—the closest to a business-as-usual scenario, although this is a phrase the agency dislikes—and essentially made its Stated Policies Scenario its base case. This is based on which policies countries are likely to implement.
Now there is a growing realisation that the targets of the Paris Agreement are almost certain to be missed and that the IEA’s Stated Policies Scenario is less relevant. Following pressure from the US government and others, the IEA has reinstated its Current Policies Scenario in the 2025 edition of the World Energy Outlook. This outlook sees limited implementation of climate policies and limited technological improvements. Here, oil demand in 2050 is as high as 114m b/d, up from 104m b/d in 2025. In the Stated Policies Scenario, 2050 demand will still be 97m b/d. What oil demand at these levels, in combination with still elevated demand for natural gas and coal, means for global emissions and climate change remains to be seen.
Uncertain futures
Of course, there are huge uncertainties about commodity prices, the development of technologies that might improve the efficiency of oil demand or see it lose share to other energy sources, and the availability and cost of finance that might support an energy transition. Uncertainties are also found on the supply side: in oil there is today little spare production capacity and thus a need for huge levels of investment to maintain current production levels and then to see an expansion to meet the growth in demand. Investment in supply is, like demand, dependent on prices and technology. Geopolitical uncertainty is always with us and is inherently unforecastable.
Such are the uncertainties that oil demand could eventually lie somewhere between the 114m b/d and 97m b/d numbers envisaged by the IEA. Or it could be lower if there is an acceleration in climate policy implementation, or higher if policies are not implemented and if developing countries use more fossil fuel even as they also increase their use of renewable energy.
Climate policy implementation is clearly stalling. The COP30 meeting in Brazil had far less momentum behind it than previous editions, with less commitment by the most important countries. The US and China were not represented at the highest level. The EU is seeing a backlash by consumers against high energy prices, with the cost of energy transition measures partly to blame. The weak fiscal position of many countries is seeing governments reduce or even eliminate support for renewable energy policies.
In the developing countries, populations are growing; this means more economic growth, which means more energy demand. Currently, energy use per capita is significantly lower than in the developed world. For oil, OECD countries use 12bl per capita per year. Even after 30 years of rapid economic growth China uses only 4.2bl and India, which is now the fastest-growing developing economy, uses only 1.4bl. The African continent lags even further behind, with only 1.1bl per capita. For sure, these countries will invest heavily in renewable energy sources, but so voracious is the appetite of their citizenry to improve the quality of their lives, that demand for fossil fuels will inevitably grow.
The outlook for oil in 2026 and for many years beyond is one of more demand for longer. Many of us have long held this view, but we now see that realism is overcoming the idealism that has held sway for so long.
Neil Atkinson is an independent energy analyst, a visiting fellow at the National Center for Energy Analytics, and a former head of the IEA’s Oil Industry and Markets Division. This article is taken from our Outlook 2026 report. To read Outlook in full, click here.
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