Peak Oil Is Not Useless: Reviewing the IEA’s World Vitality Outlook for 2025

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A month in the past, media all around the web went loopy repeating the next headline (or an analogous one) again and again:

“IEA scraps Peak Oil, says oil demand will proceed rising till 2050.”

All this oil-positive hype was a results of the IEA’s World Vitality Outlook for 2025. This report was printed again in November, and, not like the earlier report from 2024, included one forecast by which oil demand was not anticipated to peak earlier than 2030, rising as a substitute by way of 2050, one thing that has in fact been utilized by oil advocates to say that the mere idea of “Peak Oil Demand” (of which we spoke in additional element on this article) is now useless.

Actuality, as at all times, is extra complicated than that. Let’s dive deeper into the IEA’s report and what it actually means.

Politics, forecasts, and situations

Let’s be blunt right here: as a lot of our readers certainly know, this was at the beginning a results of political stress. The US authorities is a considerable supply of funds for the IEA, and Donald Trump’s authorities, due to this fact, has the means to stress this establishment into together with totally different forecasts underneath totally different assumptions. On this case, what led to this “oil constructive” forecast was the re-introduction of the “Present Insurance policies” (CPS) state of affairs, a forecast that mainly assumes no additional actions will probably be taken towards local weather change from a coverage perspective.

This state of affairs had been deserted in 2019, with the IEA as a substitute favoring the “Acknowledged Insurance policies” (STEPS) state of affairs, one which considers that motion towards local weather change has traditionally elevated by way of time and integrates that data into the forecast. And lo and behold, if we take a look at the “Acknowledged Insurance policies” state of affairs within the 2025 World Vitality Outlook (as a result of it’s nonetheless there), oil demand as soon as once more is forecasted to fall after a peak in 2030, simply because it was in 2024.

As a lot as this was a results of political interference, there’s an argument to be made right here: the truth that the US is at present present process an unlimited reversal from Biden’s IRA insurance policies selling renewable energies and electrical automobiles is in itself proof that assuming ever-increasing insurance policies towards local weather change shouldn’t be correct. Trump’s authorities, on this sense, is each choose and executioner, forcing the IEA to acknowledge that the US is now firmly on the pro-oil facet, and can attempt to maintain cash flowing to grease barons (in addition to conserving emissions rising) for some time longer.

However this brings us to the crux of the matter: forecasts based mostly upon insurance policies as of 2025 are, in my view, out of date.

The issue with all “Insurance policies” situations

Certainly, if the primary purpose for development in EV gross sales and renewable era was public coverage, a reversal such because the USA’s may wreak havoc on any forecast. For instance: Biden’s IRA was purported to deliver the US into the 21^st century, however now Trump is doing all he probably can to tug the nation again to the 20^th. But, as we are going to see, the US could possibly be an outlier right here.

To start with, let’s take a look at what the IEA says concerning the CPS and STEPS situations:

The Present Insurance policies State of affairs builds on a slender studying of at present’s insurance policies, taking solely these which can be adopted in laws and regulation. It presents a typically cautious perspective on the velocity at which new vitality applied sciences are deployed and built-in into the vitality system. It tends to challenge slower development within the adoption of latest applied sciences within the vitality system than seen in recent times, or than projected within the STEPS. Consequently, the CPS initiatives a considerably larger persevering with function for conventional fuels.

The Acknowledged Insurance policies State of affairs builds on a broader studying of the coverage panorama, taking account of these which have been formally tabled however not but adopted in addition to of different official technique paperwork that point out the specified course of journey. It doesn’t, nonetheless, assume that aspirational targets are met. It presents a extra dynamic perspective on vitality expertise and market tendencies, and it initiatives a barely extra speedy introduction of latest vitality applied sciences than the CPS.

In fact, elements aside from public coverage (together with technological developments) are included within the report, but it surely’s these two situations that set the primary narrative, and each are closely inclined to research what actions governments will take to curb emissions. And to be fully honest, within the present standing of the USA, that is probably true: Biden’s IRA led to a major enhance in wind, photo voltaic, battery, and EV manufacturing and deployment; and underneath Trump these have slowed down (photo voltaic), stagnated (batteries, wind), and even confronted a reversal (EVs).

However the US underneath Trump is beset by a set of circumstances which can be in no way everlasting, nor do they apply to the remainder of the world. Dealing with a commerce struggle with China, the US stays unable to take advantage of the hyper-affordable cleantech coming from that nation. In the meantime, the fossil gasoline foyer has completed an outstanding job not solely selling fossil gasoline extraction, but additionally limiting renewable vitality deployment each by way of important propaganda (“charges are growing due to photo voltaic”) and outright political intervention (such because the cancellation of Esmeralda 7 in Nevada or the current suspension of land leasing to Revolution Wind, Dawn Wind, Winery Wind 1, Coastal Virginia Offshore Wind, and Empire Wind 1).

So far as I do know, no different nation is dealing with situations remotely like these: even in right-wing led nations (like Argentina) we see large deployment of photo voltaic and growing EV adoption pushed not by coverage, however for the sheer financial benefits these applied sciences deliver.

Because of this even when the IEA’s situations are considerably correct vis-à-vis the present situations within the US, they’re not more likely to cowl the complete scope of the transition taking place elsewhere on the planet. And for that, I wish to level out two examples that present how far behind the IEA’s thought could possibly be concerning the true drivers of the vitality transition.

The IEA’s blind spots

Let’s take a look at a few fragments from the IEA’s most up-to-date report:

“[In the CPS] Photo voltaic PV and wind proceed to broaden, however they face mounting integration challenges within the CPS within the absence of extra authorities insurance policies, which sluggish their deployment. Annual photo voltaic PV capability additions common 540 GW to 2035, holding regular at roughly the 2024 degree, and halting the pattern that has seen deployment rise ten-fold from 2015 to 2024.”

[…]

“Renewables are set to broaden considerably within the STEPS. Their put in capability almost triples by 2035, elevating the renewables share of world electrical energy era from one-third in 2024 to over half. Photo voltaic PV and wind proceed to paved the way, with photo voltaic PV capability projected to extend greater than fourfold to 2035 with annual additions reaching round 650 GW.”

Most of our readers are most likely shaking their heads at this very second. I imply, I knew the IEA was purported to be a bit pessimistic in its predictions concerning photo voltaic, however that is absurd even for the “optimistic” STEPS state of affairs.

Based on Ember Vitality, photo voltaic additions worldwide will quantity to only over 600 GW in 2025 (with 482GW already deployed by September). Because of this the IEA’s “optimistic” STEPS state of affairs assumes almost 0% development in photo voltaic deployment by way of the following 10 years, whereas the CPS truly expects photo voltaic deployment to lower.

However that is an absurd proposition. Photo voltaic panels are getting cheaper by the day, that means adoption will enhance just by mere economics. Even when this wasn’t the case, they’re low-cost sufficient to outcompete another present different and batteries are additionally getting cheaper, that means extra photo voltaic vitality will probably be deployed in already solar-rich areas as soon as there’s some storage to reap the benefits of it. There’s additionally an institutional inertia right here: utilities used to the centralized mannequin of fossil fuels, nuclear, and hydro will take some time to undertake renewables at a big scale not due to economics, however due to the know-how wanted to make it work, but these utilities will ultimately undertake photo voltaic (and wind) at elevated charges even when worth doesn’t additional scale back as their capability to combine it into the system improves.

And for this reason I wish to level out this chart, which I really feel summarizes my notion on the IEA’s blind spots concerning this transition:

An enormous chunk of the Rising Markets and Creating Economies (EMDE) exists throughout the “Solar belts” surrounding the Tropics of Capricorn and Most cancers, in addition to throughout the Intertropical Convergence Zone, which, even when it receives much less solar than the semi-arid areas to the north and the south, has regular solar all around the yr, making it superb for predictable photo voltaic era. On this sense, to say that these quickly rising, price-sensitive areas will solely attain 25% in 25 years appears naïve (extra in order, afterward, the IEA forecasts extra fuel additions than photo voltaic by way of the following decade in these similar nations).

Why the IEA is improper on EVs

Concerning vitality deployment, I could possibly be off: I do know my means round renewables, however they’re removed from my specialty. However I’m completely sure that each forecasts for EV gross sales — CPS and STEPS — are dramatically underestimating adoption for electrical automobiles in growing nations throughout the coming decade.

(I additionally suppose they’re off the mark in superior economies, however I suppose the US may in principle fumble up this transition so badly as to deliver the typical down by that a lot).

Lots of you’ve gotten already learn a few of my articles, so you might know the place I’m coming from, however let’s make a listing of arguments on why we are able to already see this gained’t be the case. The strains aren’t fully clear on the numbers, but it surely appears underneath CPS we (EMDE) sit at under 10% adoption, and underneath STEPS we sit at slightly below 20%. Each numbers massively miss the mark as a result of:

1. We’re already seeing speedy change in a number of massive markets in growing nations that command their regional averages. Our report on Latin America’s EV Gross sales revealed a 6% for Q3 2025, with the most important markets within the area (Brazil and Mexico) presenting speedy development, and, within the case of Brazil, important Chinese language funding in native manufacturing. South-East Asia additionally has its personal giants quickly rising, with Indonesia and Thailand (its greatest markets) already above 15% and 20% respectively, and with Thailand turning into a hub for EV manufacturing. Collectively, LatAm + ASEAN account for nearly 10 million models, or over a 3rd of all automobiles bought exterior China and developed economies. And it’s not restricted to that, in fact: we’ve additionally seen important development in markets like Türkiye, and it’s probably many Central Asian and African nations are additionally rising quick, regardless that restricted knowledge doesn’t enable us to have a full image right here.
2. There’s a rising relationship between China and the growing world. China is providing poor nations reasonably priced gear to both produce electrical energy with out gasoline necessities or to maneuver individuals round, and far because the economical issue issues right here, politics additionally do. China’s affect in Central Asia, for instance, could enable for historically oil-centered nations to pivot to EVs, whereas its inroads in Africa and Latin America are already displaying outcomes.
3. A huuuuge quantity of those nations are resource-depri, particularly missing oil reserves. Actually poor nations know very properly the steep value of gasoline imports at instances of failing exports, and from Bolivia to Sri Lanka they’ll pivot to EVs as quickly as materially doable, as technique of defending themselves. Center-income nations don’t have such a rush, however they nonetheless know they’re significantly better off importing automobiles which will be fueled with domestically produced electrical energy versus costly overseas oil. Even oil producing nations (notably those that don’t have a number of reserves) can profit from decrease oil consumption, liberating extra of the useful resource to gasoline exports and convey precious overseas forex.
4. China’s EV increase and the “overcapacity” that got here with it has allowed growing nations to entry EVs at very comparable costs to ICEVs. Those that haven’t reached this level will accomplish that within the second half of this decade, thus fueling EV adoption.
5. As I’ve mentioned earlier than, growing nations have a cultural ethos that prioritizes financial system over consolation, that is, they’ll tolerate a worse fueling expertise and restricted autonomy (with the intention to get monetary savings) at a lot larger charges than of us in Europe and the US.

I will probably be very stunned if Latin America hasn’t reached a minimum of 30% EV market share by the top of the last decade, and I count on South-East Asia to be additional forward, so who’s going to deliver the typical down to twenty% even by 2030? The Center East, maybe? India, I’d depend out since they lack oil reserves and have quickly rising EV adoption. So depend me out on the IEA’s forecast for Rising Markets and Creating Economies.

Politics vs economics

My feeling right here is that public coverage in growing nations has been the driving power for renewable deployment and EV adoption for therefore lengthy that the IEA’s evaluation has not had time to adapt to the brand new realities the place the World South is spearheading adoption for these applied sciences to guard their financial curiosity.

That is additionally why I don’t wish to delve a lot on the IEA’s forecast for growing nations, because the US is totally remoted from Chinese language imports and Europe can also be considerably protected, that means they don’t function underneath the identical framework and thus the establishment may have higher purpose right here.

Regardless, I feel it’s time to let go of the out of date notion that this transition will probably be led by wealthier nations.

Ultimate ideas

This text is lengthy sufficient as it’s, however there’s one thing that at all times surprises me concerning vitality forecasts, each from the IEA and OPEC, and it’s how a lot they each count on vitality demand to develop by way of 2050.

It’s not that I feel they’re improper, it’s that as a substitute of the 20% to 30% vitality demand development that they each challenge, I’d count on maybe a doubling, extra so with AI’s increase (regardless that Mr. Barnard has already identified that each one that vitality demand could also be overblown).

Extra importantly, each the IEA in its Present Insurance policies state of affairs and OPEC appear to agree that fossil fuels is not going to get replaced by renewables, as a lot as be complemented by them, that means none of those establishments is contemplating the discount on web vitality consumption due to larger effectivity.

However, assuming they’re roughly proper and web vitality consumption is unlikely to rise greater than 30% by way of the following two and half a long time, I really feel that they’re vastly overestimating the resilience of fossil fuels. As photo voltaic and batteries grow to be cheaper, as nations discover ways to efficiently combine renewables into their grids, as nations all around the world be taught increasingly more to be partially unbiased from grids and construct photo voltaic + EV arrays of their communities to have a tendency their most important wants, I might count on that fossil fuels wouldn’t solely not rise anymore, however expertise a steep decline.

Nevertheless, it’s true that political, cultural, and economical inertia are a strong power, and that oil demand has been extra resilient than I anticipated amidst the world’s EV increase in 2025. As a substitute of a leveling up, we’re nearly sure to see a rise in demand of some 800,000 barrels a day, and even when most (or all) of that’s going into storage, it implies that the daybreak of fossil fuels could but take us a couple of extra years to succeed in.

Hopefully, a yr from now, we will probably be celebrating larger EV gross sales, larger photo voltaic and wind deployment, and stagnant and even falling gross sales for oil, fuel, and coal.