The global appetite for oil and natural gas is projected to continue climbing into 2050, driven by rising demand in emerging economies, energy-security concerns, and infrastructure lock-ins — according to the latest outlook from the International Energy Agency (IEA). The shift marks a notable departure from earlier expectations of imminent fossil-fuel peaks and underlines how current policy settings remain misaligned with climate objectives.
The policy baseline that underpins growth
Under the IEA’s so-called “current policies scenario” (CPS), which assumes only existing legislation and measures are kept in place (rather than full implementation of announced climate pledges), oil and natural gas demand grow until at least mid-century. In this scenario, global oil demand is projected to reach around 113 million barrels per day by 2050 — roughly 13 per cent above present levels — while liquefied natural gas (LNG) trade expands significantly. The IEA identifies emerging markets as the main drivers of this growth, particularly in Asia where industrialisation, urbanisation and power-sector expansion remain strong.
The continuation of fossil-fuel use in the CPS reflects a confluence of factors: countries still prioritising energy security and affordability; the inertia of existing infrastructure; and the slow pace of policy implementation. Many governments maintain support for oil and gas production and imports, even as renewables gain ground. By bringing back the CPS (which the IEA had previously dropped in favour of high-ambition scenarios), the agency signals more realism about the gap between climate ambitions and actual policy delivery.
In parallel, the IEA’s “stated policies scenario” (STEPS) — which incorporates announced but not yet fully implemented policies — shows a slower growth path, with oil demand flattening by around the end of the decade and natural-gas demand continuing to grow into the 2030s. However, even under STEPS, the declines in fossil-fuel use are not steep enough to meet the most challenging climate targets.
Key drivers behind sustained demand for oil and gas
Several structural forces underpin the IEA’s projection of growing or at least sustained oil and gas demand toward 2050:
Why this outlook poses major implications for climate targets
The IEA’s projection of continued fossil-fuel use underscores a fundamental tension between current trajectories and climate ambitions. Under the CPS, global temperatures are on track to rise nearly 3 °C by 2100 — far beyond the 1.5 °C target of the Paris Agreement. Even under STEPS, the warming trajectory remains around 2.5 °C, indicating that incremental policies will be insufficient.
One of the central concerns is that growing demand for oil and gas complicates efforts to align with net-zero pathways. For example, in higher-ambition scenarios where fossil-fuel use drops dramatically, no new long-lead-time oil and gas fields are approved and many existing assets are retired early. By contrast, growth under the CPS assumes continued investment and operation of upstream, midstream and downstream fossil-fuel infrastructure, increasing the risk of lock-in and stranded-asset exposure.
Additionally, the expansion of LNG — which the IEA expects to increase by roughly 50 per cent in new export capacity by 2030 — could make future emissions cuts even more challenging. While gas is often framed as a transition fuel, the scale and growth of gas infrastructure underline how it may become part of the destination energy system, not just a bridge.
Regional patterns and sectoral outlooks
While global figures dominate the headlines, regional variation is wide:
In emerging Asia, both oil and gas demand growth are strongest. India and Southeast Asia feature prominently in the IEA’s outlook as regions where economic growth, urbanisation and manufacturing expansion support fossil-fuel consumption for decades. By contrast, in many advanced economies the growth is flat to modest, and the shift to electric vehicles and renewables is more mature.
For oil, transport remains the largest demand segment — notably road transport, aviation and shipping. Although electric vehicles are growing rapidly, they are offset in many markets by increasing vehicle stock, heavier trucks, and longer distances. In industrial-feedstock applications, oil remains hard to replace quickly.
Gas growth is heavily supported by power-generation, industrial heat, petrochemicals and LNG exports/imports. The IEA expects the global LNG market to rise from around 560 billion cubic metres (bcm) in 2024 to 880 bcm by 2035 and to approximately 1 020 bcm by 2050 under the CPS.
Refining-sector dynamics also matter: while demand for traditional transport fuels may someday plateau or decline, demand for petrochemicals, plastics, asphalt and bitumen is rising. That means oil refiners may shift product mix rather than simply wind down operations.
Investment, risk and strategic choices for market participants
The projection of rising oil and gas demand has profound implications for the energy industry, investors and policymakers. On one hand, it suggests that fossil-fuel producers and infrastructure owners may benefit from extended demand lifetimes, generating returns in markets previously thought to be in terminal decline. On the other hand, the mismatch with climate goals signals heightened transition risk.
For investors, decisions regarding upstream project approvals, LNG terminals, pipelines and refineries must now account for longer demand trajectories — and equally, for the potential that unabated fossil use will trigger regulatory, carbon-price or demand-shock risks later. The question of stranded assets thus becomes more complex: while assets may live longer, they may still fall victim to disruptive policy or technology shifts.
For governments and policymakers, the outlook raises hard questions. If current policies imply long-term fossil-fuel demand growth, then to meet climate goals either policy must strengthen significantly, or technological breakthroughs must accelerate rapidly. Infrastructure planning, fossil-fuel subsidies, regulatory frameworks and support for clean technologies all come into play.
Why the pivot from previous expectations
The IEA’s revised tone — accepting that oil and gas demand may not peak imminently — reflects three inter-related dynamics. First, real‐world policy implementation has lagged ambition: announced pledges are often delayed, funding is lacking, and infrastructure inertia remains strong. Second, emerging-economy demand is outpacing what earlier models assumed, driven by demographic and economic trends. Third, the energy-security and geopolitics backdrop has shifted: recent supply disruptions, energy trade tensions and concerns about affordability have made many governments more cautious about speeding a full fossil phase-out.
In this context, the re-introduction of the CPS scenario by the IEA signals a more conservative stance: rather than assuming rapid transformation to net-zero pathways, the agency models a world where existing policies persist. That does not mean alternative technologies stop growing — they continue rapidly — but the displacement of oil and gas is slower.
The endurance of oil and gas demand — while perhaps logical given economic and structural realities — presents a stark signal that achieving deep emissions reductions will be far more difficult. This reality demands that climate-aligned transitions need to accelerate much further than currently assumed if global warming limits are to be honoured. That includes faster deployment of renewables, electrification, carbon capture and storage, demand-side efficiency, and behavioural change.
For fossil-fuel-dependent economies, the outlook raises the dual challenge of extracting value from current resources while preparing for long-term transition risk. It underscores that even in a growth scenario there is an imperative for strategic planning: managing the timing of investments, considering future asset-life risk, and ensuring that infrastructure flexibility is maintained.
Ultimately, the IEA’s updated outlook invites a reassessment of the trajectory of the global energy system: one that may retain a dominant fossil footprint well into the middle of this century — with all the implications that carries for climate, investment and policy strategy.a
(Source:www.marketwatch.com)
The policy baseline that underpins growth
Under the IEA’s so-called “current policies scenario” (CPS), which assumes only existing legislation and measures are kept in place (rather than full implementation of announced climate pledges), oil and natural gas demand grow until at least mid-century. In this scenario, global oil demand is projected to reach around 113 million barrels per day by 2050 — roughly 13 per cent above present levels — while liquefied natural gas (LNG) trade expands significantly. The IEA identifies emerging markets as the main drivers of this growth, particularly in Asia where industrialisation, urbanisation and power-sector expansion remain strong.
The continuation of fossil-fuel use in the CPS reflects a confluence of factors: countries still prioritising energy security and affordability; the inertia of existing infrastructure; and the slow pace of policy implementation. Many governments maintain support for oil and gas production and imports, even as renewables gain ground. By bringing back the CPS (which the IEA had previously dropped in favour of high-ambition scenarios), the agency signals more realism about the gap between climate ambitions and actual policy delivery.
In parallel, the IEA’s “stated policies scenario” (STEPS) — which incorporates announced but not yet fully implemented policies — shows a slower growth path, with oil demand flattening by around the end of the decade and natural-gas demand continuing to grow into the 2030s. However, even under STEPS, the declines in fossil-fuel use are not steep enough to meet the most challenging climate targets.
Key drivers behind sustained demand for oil and gas
Several structural forces underpin the IEA’s projection of growing or at least sustained oil and gas demand toward 2050:
- Emerging-market growth: Developing regions, especially in South Asia and Southeast Asia, remain the engine of energy demand growth. Rising living standards, infrastructure investment, expanding manufacturing and heightened mobility are all boosting fossil-fuel consumption in places where alternatives are still nascent. The IEA highlights that much of the incremental energy demand to 2050 comes from those economies.
- Power-sector and industrial linkages: The growth in electricity demand — which the IEA projects will climb sharply through 2035 — helps drive gas demand, notably for power-generation and backup roles. Meanwhile, oil remains critical for transport, aviation, petrochemicals and petro-feedstock use, areas that are harder to decarbonise quickly. The slow replacement of existing vehicles and long-lived capital stock in heavy industry further supports oil demand longevity.
- Infrastructure and supply-chain lock-in: Many countries have built extensive oil and gas infrastructure — refineries, pipelines, LNG terminals, exploration and production facilities — which create momentum and functional inertia. Investments made today can lock in decades of use. Moreover, new LNG export capacity is coming on stream, enabling increased trade and supply flexibility that supports demand growth.
- Energy-security and geopolitical concerns: The recent era of volatile energy markets, supply disruptions and geopolitical tensions has put energy security back on national agendas. This has translated into a hedging bias: countries often keep oil and gas infrastructure and supply options open, even while they expand renewables. The result is a slower pivot away from fossil fuels.
- Slow policy and technology roll-outs: While wind, solar, batteries, and electrification are advancing rapidly, the pace is uneven globally. In many places, the scale-up of low-carbon alternatives is not fast enough to displace fossil fuels at the rate needed for an early peak. Some countries remain heavily reliant on oil and gas for economic, industrial or export reasons, delaying structural change.
Why this outlook poses major implications for climate targets
The IEA’s projection of continued fossil-fuel use underscores a fundamental tension between current trajectories and climate ambitions. Under the CPS, global temperatures are on track to rise nearly 3 °C by 2100 — far beyond the 1.5 °C target of the Paris Agreement. Even under STEPS, the warming trajectory remains around 2.5 °C, indicating that incremental policies will be insufficient.
One of the central concerns is that growing demand for oil and gas complicates efforts to align with net-zero pathways. For example, in higher-ambition scenarios where fossil-fuel use drops dramatically, no new long-lead-time oil and gas fields are approved and many existing assets are retired early. By contrast, growth under the CPS assumes continued investment and operation of upstream, midstream and downstream fossil-fuel infrastructure, increasing the risk of lock-in and stranded-asset exposure.
Additionally, the expansion of LNG — which the IEA expects to increase by roughly 50 per cent in new export capacity by 2030 — could make future emissions cuts even more challenging. While gas is often framed as a transition fuel, the scale and growth of gas infrastructure underline how it may become part of the destination energy system, not just a bridge.
Regional patterns and sectoral outlooks
While global figures dominate the headlines, regional variation is wide:
In emerging Asia, both oil and gas demand growth are strongest. India and Southeast Asia feature prominently in the IEA’s outlook as regions where economic growth, urbanisation and manufacturing expansion support fossil-fuel consumption for decades. By contrast, in many advanced economies the growth is flat to modest, and the shift to electric vehicles and renewables is more mature.
For oil, transport remains the largest demand segment — notably road transport, aviation and shipping. Although electric vehicles are growing rapidly, they are offset in many markets by increasing vehicle stock, heavier trucks, and longer distances. In industrial-feedstock applications, oil remains hard to replace quickly.
Gas growth is heavily supported by power-generation, industrial heat, petrochemicals and LNG exports/imports. The IEA expects the global LNG market to rise from around 560 billion cubic metres (bcm) in 2024 to 880 bcm by 2035 and to approximately 1 020 bcm by 2050 under the CPS.
Refining-sector dynamics also matter: while demand for traditional transport fuels may someday plateau or decline, demand for petrochemicals, plastics, asphalt and bitumen is rising. That means oil refiners may shift product mix rather than simply wind down operations.
Investment, risk and strategic choices for market participants
The projection of rising oil and gas demand has profound implications for the energy industry, investors and policymakers. On one hand, it suggests that fossil-fuel producers and infrastructure owners may benefit from extended demand lifetimes, generating returns in markets previously thought to be in terminal decline. On the other hand, the mismatch with climate goals signals heightened transition risk.
For investors, decisions regarding upstream project approvals, LNG terminals, pipelines and refineries must now account for longer demand trajectories — and equally, for the potential that unabated fossil use will trigger regulatory, carbon-price or demand-shock risks later. The question of stranded assets thus becomes more complex: while assets may live longer, they may still fall victim to disruptive policy or technology shifts.
For governments and policymakers, the outlook raises hard questions. If current policies imply long-term fossil-fuel demand growth, then to meet climate goals either policy must strengthen significantly, or technological breakthroughs must accelerate rapidly. Infrastructure planning, fossil-fuel subsidies, regulatory frameworks and support for clean technologies all come into play.
Why the pivot from previous expectations
The IEA’s revised tone — accepting that oil and gas demand may not peak imminently — reflects three inter-related dynamics. First, real‐world policy implementation has lagged ambition: announced pledges are often delayed, funding is lacking, and infrastructure inertia remains strong. Second, emerging-economy demand is outpacing what earlier models assumed, driven by demographic and economic trends. Third, the energy-security and geopolitics backdrop has shifted: recent supply disruptions, energy trade tensions and concerns about affordability have made many governments more cautious about speeding a full fossil phase-out.
In this context, the re-introduction of the CPS scenario by the IEA signals a more conservative stance: rather than assuming rapid transformation to net-zero pathways, the agency models a world where existing policies persist. That does not mean alternative technologies stop growing — they continue rapidly — but the displacement of oil and gas is slower.
The endurance of oil and gas demand — while perhaps logical given economic and structural realities — presents a stark signal that achieving deep emissions reductions will be far more difficult. This reality demands that climate-aligned transitions need to accelerate much further than currently assumed if global warming limits are to be honoured. That includes faster deployment of renewables, electrification, carbon capture and storage, demand-side efficiency, and behavioural change.
For fossil-fuel-dependent economies, the outlook raises the dual challenge of extracting value from current resources while preparing for long-term transition risk. It underscores that even in a growth scenario there is an imperative for strategic planning: managing the timing of investments, considering future asset-life risk, and ensuring that infrastructure flexibility is maintained.
Ultimately, the IEA’s updated outlook invites a reassessment of the trajectory of the global energy system: one that may retain a dominant fossil footprint well into the middle of this century — with all the implications that carries for climate, investment and policy strategy.a
(Source:www.marketwatch.com)
