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IEA Report: Rising Oil Demand to Offset Gains in Electric Vehicles, Fuel Efficiency


The International Energy Agency (IEA) released its World Energy Outlook 2017 on Tuesday, painting a grim picture for the future of climate change mitigation and clean transportation with oil demand slated to continue rising in the coming decades.

According to the report’s New Policies Scenario, global energy demand is expected to increase by 30% between 2017 and 2040, with a third of this total predicted to come from India. Although renewable sources are to meet 40% of world’s primary energy demand by 2040 and electricity use could comprise 40% of the growth in final consumption by 2040, cheap oil prices and plentiful supply may obstruct a deep decarbonization of the transportation sector.

The New Policies Scenario sees demand for oil remaining strong through the mid-2020s, rising to a production level of 105mn barrels a day by 2040. Even though the IEA expects efficiency gains and fuel switching to dampen oil use for passenger vehicles, a simultaneous boom in oil for petrochemicals, trucks, aviation, and shipping prevents global oil demand from peaking, especially given a lack of strong policy in other sectors. While the global electric car fleet nears the 900mn mark by 2040, the global car fleet as a whole is expected to double from today’s level to 2bn in 2040 as well. With oil hovering around $50-70/barrel in 2040, the IEA states that absent other policies, few incentives will exist to convince consumers to transition away from oil.

The outlook for climate change mitigation does not appear promising either, as the New Policies Scenario puts energy-related carbon dioxide (CO2) emissions in 2040 at 35.7 gigatons, up slightly from current levels. Oil from the transportation sector is expected to be a major contributor to these emissions, nearly catching up with the release of CO2 from plateauing coal use by 2040, while industrial emissions are on track to rise by 20%.

Overall, the IEA report summarizes several other key trends in global energy demand and consumption. The rapidly cheapening cost of renewables, for some countries the lowest-cost energy option, are to attract two-thirds of global power plant investment by 2040. More stringent energy and fuel-efficiency measures and a more service-based economy in China are expected to help slow GHG emissions and coal use in the world’s largest country, while the US builds on its status as a net exporter of gas and achieves net exports of oil by the end of the 2020s.

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