The International Energy Agency (IEA) has predicted that global oil demand will peak by 2029 and begin to contract the following year, as the shift towards cleaner energy sources and the rise of electric vehicles take hold. This revised forecast is earlier than the IEA’s previous projection of a demand peak by 2030.
The IEA’s outlook contrasts with that of the Organization of the Petroleum Exporting Countries (OPEC), which sees demand continuing to rise well past 2029 due to a slower transition to more environmentally-friendly fuels.
According to the IEA’s annual report, oil demand is expected to plateau at 105.6 million barrels per day (bpd) by 2029 before declining slightly in 2030. Meanwhile, supply capacity is projected to hit nearly 114 million bpd by 2030, outpacing demand by a significant 8 million bpd.
This looming supply surplus is largely attributed to increased production from non-OPEC+ countries, led by the United States, which is expected to account for three-quarters of the capacity increase.
The IEA’s Executive Director, Fatih Birol, warned that this report’s findings suggest oil companies should ensure their business strategies and plans are prepared for the upcoming changes in the industry.
The projected supply glut could have significant consequences, particularly for OPEC nations that rely heavily on oil revenues for their government budgets. It could also impact the U.S. shale industry.