The International Energy Agency, one of the top intergovernmental organizations providing policy recommendations, energy analytics and energy technology analysis, issued its closely watched World Energy Outlook for the year 2025. However, this year’s report came with a groundbreaking surprise which astonished several energy market participants. The present research will go through and analyse the most important analytics contained in the report, hence, all the charts and tables which will be presented and examined in this research comes from the World Energy Outlook 2025 and have been entirely developed by the International Energy Agency. The present research won’t comment the entire IEA reports but only a few aspects of it.
Furthermore, it is worth mentioning that the IEA’s World Energy Outlook does not provide forecasts but scenarios. Hence, the “current policies”, “stated policies” and “net zero” are not forecasts but scenarios which means they are not built to provide readers with what is probably going to happen but they rather provide a view of what would happen if certain policies were approved or certain measures were not taken. Forecasts provide readers with an idea of what is going to happen within a certain level of statistical confidence while scenarios provide a broad, general view of what would eventually happen if certain factors (in this case policies) were or were not implemented.
Liquefied Natural Gas (LNG)
The first thing that will be examined is the liquefied natural gas (LNG) which is probably the rising star of energy in the next 30-35 years. The IEA suggests that since 2015, LNG consumption expanded twice as fast as that of regular natural gas and since 2023 there was more natural gas being shipped out at sea as LNG than natural gas travelling through large-scale pipelines. However, the growth of LNG is set to continue for several years to come, in fact, according to IEA projections, the export capacity of LNG is set to grow by 300 billion cubic meters only in the period between 2025 and 2030; that is an expansion of 50% as far as global LNG supply is concerned. In all likelihood, LNG is going to be the transitionary fuel which will bridge the shifting from a traditional-fuel-based society to a green-fuel society. However, where is the additional capacity of LNG supply going to come from?
The additional capacity is under development and will come online in the near future, however, its geography has been shifting from 2010 when most of it was being built in Qatar to 2025 when other countries began building LNG capacity. In fact, Australia, USA and Canada joined the race and between 2025 and 2030, the IEA expects USA, Qatar and, to lesser extent, Canada to be bringing the new LNG capacity online. In the current policy scenario (CPS), which includes only the policies that have been approved and are already in place, more than half of the increase in LNG supply will be “absorbed” by China, Europe and Japan.
This implies that already by 2035, the IEA estimates that on top of what it is being currently supplied, an extra 20 billion cubic meter per year of LNG capacity will be needed in order to satisfy the global demand as more Asian countries will need it too. In the stated policies scenario (STEPS), which includes the policies that have been approved and are already in place plus the policies that have been announced but are not yet been approved or physically implemented, LNG prices would trade lower than in the current policy scenario. This phenomenon is due to the competition with renewable sources of energy which would put pressure on LNG prices driving them down. However, this price dynamic would expand even more the demand for LNG because it would make it cheaper and in countries like India and particularly in South East Asia it would contribute to significantly increment LNG demand. In both IEA’s scenario, LNG is expected to considerably expand as a source of energy.
The IEA chart shows the evolution of the three scenarios it uses in the report. With the exclusion of the Net Zero Emissions, which assumes that all the right policies will be approved and implemented and the world will achieve the zero emission goal by 2050, the current policy scenario and the stated policy scenario project a future LNG capacity which will likely be around 870-880 billion cubic meters by 2035. The chart is also particularly interesting because it visually shows how large is the additional LNG capacity which is being built as a result of the future bigger demand. However, what it is going to be the most likely composition of LNG demand in the coming years?
The IEA shows once again 2 scenarios: current and stated policy scenarios. The first thing to notice is that Europe and Asia will be the most important continents for LNG. The demand in Europe and China would be very high in both regions in the current policy scenario, however, it would remain rather good in Europe and very good in China, in the stated policy scenario. Japanese and South Korean demands are expected to be far from exceptional while in Southeast Asia, India and Asian developing economies (Malaysia, Philippines, Thailand, Pakistan, Bangladesh, Indonesia, Vietnam), the demand for LNG is projected to be very high in the current policy scenario and exceptionally high under the stated policy scenario (as previously mentioned, in the stated policy scenario LNG would compete with a higher output of electricity coming from renewable sources which would lower the price, making it more affordable for Asian countries). In any case, the International Energy Agency’s World Energy Outlook 2025 clearly sees a bright future for LNG, which is set to become one of the most important fuels in the world.
Crude Oil
The following chart is groundbreaking. For the first time ever, the International Energy Agency eliminated the peak oil theory from its World Energy Outlook.
As far as traditional fossil fuels are concerned, the aforementioned change is of monumental importance and proportion because, within the energy transition era, almost all energy and political institutions around the world would always tend to incorporate and favor a view in which oil or fossil fuel demand would peak. In the IEA current policies scenario, instead, this does not happen anymore. In fact, the chart clearly displays all rising projections for the most traditional fossil fuels in the world: crude oil, natural gas and coal. Crude oil and natural gas since 2024 are expected to continue on their growth path. In fact, in terms of energy content generated they are supposed to respectively reach 220 and 190 exajoule by 2050. Obviously, the current policy scenario implies a prolonged and constant increment in demand for traditional fuels with no further implementation of new green policies which could be less realistic for advanced economies but not that far from the truth for emerging or developing ones.
Emerging and developing economies, and in particular Asian countries whose energy consumption is expected to grow exponentially in the future, tend to be rather slow in approving, adopting and implementing green policies. Furthermore, even if there is the political will to actually speed the process up, several emerging and developing economies lack the financial resources to quickly build the necessary infrastructure to generate energy via renewable sources or the logistics facilities to securely store environmentally-friendly fuels (ammonia, hydrogen, etc).
Therefore, even if there could be an acceleration in the generation of power via green sources of energy in the USA or Europe, it is highly unlikely that several other countries around the world will follow at the same speed. Consequently, crude oil and natural gas demands will likely continue to expand all the way to 2050. There is one last consideration to make, as far as crude oil and gas are concerned: even if developed economies are more likely to approve and implement green policies to reduce the carbon emissions coming from traditional fuels, it is rather improbable that they will be able to fully electrify the entire transportation sector. In particular, the car fleet will take several years before becoming fully electric and some sectors are, at least now, almost impossible to electrify. In fact, apart from the fact that the car fleet replacement is usually very slow, there are no enough batteries yet to sustain a global car fleet of EVs and certain transportation sectors such as shipping and aviation seem impossible to electrify right now.
In fact, there is no valid substitute for jet fuel at the moment because all alternative fuels produce less energy content (in joule) per volume than jet fuel and given the fact that airplanes need a very intense and powerful source of energy, the electrification of the airline industry seems very far-fetched (even for developed economies). The same principle holds true for commercial shipping. Deep-sea vessels normally used to transport large quantities of crude oil, petroleum products, LNG but also iron ore and containers are massive and very heavy. These ships require a lot of power to move around and sail through the ocean and if they were fully electric, the battery would have to be as big as the ships themselves. This makes the electrification of this strategically important industry very difficult to achieve (even for developed economies).
The only exception would be short-sea vessels which sail for rather short distances requiring much less power and these small ships can be recharged frequently. Electrification would be rather challenging even for commercial trucks which need to drive over long distances because, given the existing battery technology, it would be almost impossible to efficiently operate a fleet of trucks (again short distances might actually be feasible) because batteries would be too heavy and would need to be recharged frequently. The only fossil fuel whose consumption is set to decline, even in the current policy scenario, is coal. The demand for coal increased over the period 2020-2024, however, coal is being gradually substituted by renewable-generated electricity (wind, solar, thermal, etc) and natural gas. The reason the decline of coal didn’t happen before and it is not going faster is Asia, at last in the current policy scenario. Numerous Asian countries still heavily rely on burning coal to generate power and therefore, in spite of the energy transition, the demand for this fossil fuel, in all likelihood, will decline at a rather slow path. The next IEA generated chart displays the geographical distribution of the production of crude oil and natural gas in the years to come (up to 2050):
Crude oil production is expected to remain rather stable in both North America and the Middle East which, even in 2050, are the regions with the highest level of production followed by the Eurasia region. Natural gas production, instead, is more geographically widespread with Middle East countries increasing their production in coming years as well as the North America region. Eurasia and Asia Pacific regions will produce less natural gas but they are not very far behind Middle East and North America. This implies that natural gas production is going to augment in the coming 20-25 years and this view fits perfectly well with both the current and stated policy scenarios for LNG. In fact, as previously mentioned, the demand for LNG in both scenarios is set to expand all the way to 2035 while production is expected to increase up to 2050. The production of coal, instead, will remain relevant only for Asia-Pacific countries while in other regions like Europe, Central and South America it will gradually diminish.
The global demand for crude oil in the current policy scenario goes from 100 million b/d in 2024 to 105 million b/d in 2035 and 113 million b/d in 2050. Overall, the global oil demand is going to be larger in emerging and developing countries, which should reach almost 70 million b/d by 2050, rather than advanced economies whose consumption should drop below 40 million b/d by 2050. The sector breakdown identifies 2 segments which, in all likelihood, will continue to expand in the future: aviation and petrochemicals. Jet fuel demand will likely increase as the demand for flights move higher thanks to an improvement in the socio-economic conditions of emerging Asian countries.
The petrochemical demand (ethylene, propylene, benzene and xylenes) will increase because Asian countries will continue to expand from a demographic standpoint. The demand for petrochemical products is strongly linked to population growth because the more people there are, the higher the demand for finished products which are usually built with plastics (predominantly produced using ethylene from which it is derived polyethylene). The third place is taken by the “other” category which groups together industrial feedstocks, general feedstocks and minor fuels used for specific industrial activities. Cars and road freight, instead, are expected to remain stable in the current policy scenario while shipping is expected to slightly expand. Most of the growth in these sectors will come once again from Asian countries as they continue to develop and China will play once again a key role (consider that China alone accounted for more than 75% of the expansion of global oil demand between 2015 and 2024).
However, in the coming years China will take the second place when it comes to oil demand growth because India will take the first one thanks to the improved economic conditions in several of its states which would allow more people to buy cars, flight tickets, finished products (more plastics) and use LPG for cooking (predominantly propane and butane). The International Energy Agency also produced a similar study under the stated policy scenario and in this case the peak oil theory got re-introduced, however, its impact is not striking.
In fact, the peak in demand is more the start of a plateau rather than marking the beginning of a decline. This happens because, even in the stated policy scenario, the global demand for crude oil and petroleum products remains fairly stable up to 2050. Even in this scenario, the largest expansion of demand comes from petrochemical products, industrial feedstocks and aviation (so jet fuel). The IEA stated policy scenario includes the peak oil theory around 2030 because it incorporates a higher car fleet replacement (EVs replacing ICE cars) and energy efficiency in building constructions.
However, it is worth noting that the car fleet of the future is unlikely to be made of electric vehicles. In fact, it is much more probable that the next generation of cars will predominantly be powered by two types of fuels where one is going to be electricity and the second one could be gas or gasoline or diesel. In other words, the next fleet of cars will likely be made of cars powered by a dual engine which is exactly the type of engine which some new commercial ships are now being built with. In all likelihood, the next generation of the global car fleet will be made for the vast majority of hybrid cars and a lower share of electric vehicles. This will imply that passenger cars will continue to use traditional fuels also in the future which implies that the demand for these will diminish but will still be highly relevant. A car fleet almost entirely made of electric vehicles is probably going to be the second next generation meaning that it is a more far-fetched scenario.
Even in the stated policy scenario, the largest increment in oil demand comes from emerging and developing economies while advanced economies are supposed to reduce even further, compared to the current policy scenario, their dependence on traditional fuels. Nevertheless, even in the stated policy scenario, the demand for crude oil and petroleum products in advanced economies does not go below the 20 million b/d which indicates that the demand remains at a medium-high level. In fact, the comparison of the oil demand in both the current policy and stated policy scenarios does not provide a strikingly different divergence. Even in the stated policy scenario crude oil, natural gas and petroleum products will play a key role in the energy mix of the future and this holds true for advanced economies as much as for emerging and developing countries.
Natural Gas
Natural gas, along with crude oil, is one of the most important source of energy in the world. Natural gas is used to generate power for houses, heating but also for industrial processes and it is the fuel most often burnt in power stations when peak electricity demand is very high (although in numerous developing countries coal is more commonly used in these cases). In other words, when electricity demand goes beyond a certain level, it has to be generated via traditional fuels (like natural gas) even if it is normally produced by renewable sources like wind or solar; natural gas or coal are used when the power generated by renewables is no longer enough to satisfy demand.
The consumption of natural gas is set to get much higher in coming years because several countries look at it as a transitionary fuel. In fact, natural gas generates a lot of power, in terms of exajoule, but it is less polluting than other traditional fuels since it is predominantly composed of methane (70% to 90% of the total volume). Methane’s chemical composition is CH4 which means it only has one molecule of carbon and four of hydrogen. The small quantity of carbon atoms makes natural gas much less polluting than coal (for reference, the chemical composition of black coal is C240H90O4NS which means a molecule of black coal has 240 carbon atoms) and the fact that it is easily available makes it a very attractive option within the framework and context of the energy transition. It is important to note that the vast majority of natural gas will transported in liquefied form, the so-called LNG, so the following analytics is directly connected to the LNG chapter of the present fundamental analytics.
The updated IEA’s natural gas current policy scenario, even in this case, got rid of the peak theory. In fact, natural gas demand is set to expand by 20% by 2035 and by 30% until 2050 with Asia Pacific, Middle East but also North America showing the most noticeable increment in domestic demand. According to the IEA, natural gas demand will increase by 70 billion cubic meters by 2035 while by 2050, it will have completely overtaken coal. By 2050, in the current policy scenario, natural gas demand will be reaching 5,600 billion cubic meters with emerging and developing countries absorbing approximately two-thirds of the global demand.
Specifically, the demand in these regions is expected to go up by 340 billion cubic meters from 2024 to 2035. This expansion will be mainly driven by power generation and industrial production while China’s demand is expected to expand by 200 to 630 billion cubic meters between the same time interval and India’s demand should be reaching 140 billion cubic meters during the same time. The stated policy scenario, instead, looks a bit different because it shows a peak. However, the chart displays a sideways movement rather than a decline; the demand remains constant even after peaking:
In the stated policy scenario, natural gas demand should reach 4,800 billion cubic meters by 2035 and should remain at this level all the way to 2050. According to the IEA, the natural gas demand will predominantly come from Asia Pacific, the Middle East and North America also in the stated policy scenario. In fact, while Europe and Japan have already peaked in 2010, the demand for emerging and developing countries is supposed to increment from 2,400 billion cubic meters in 2024 to 2,950 in 2035. All in all, the stated policy scenario, although it includes a top point which is more “pronounced” for Europe and Japan, continues to show a rather steady demand for natural gas also in the future.
The International Energy Agency estimates that power generation, industrial production, heating and transportation will keep being the most crucial sectors in which natural gas will be used the most. However, natural gas can be “sourced” in two ways: it can be domestic or imported and if it is imported, it is usually delivered via pipeline or via LNG tankers. The next IEA chart looks exactly at this and puts things into geographical perspective:
The study done by the IEA is particularly interesting because it highlights how natural gas is going to be traded. In fact, with the exception of China and India, which have domestic productions, all other regions will have to import it from elsewhere. The European Union, which does have a very small local production, will completely change the way natural gas is going to be imported, in fact, European dependency on pipelines will remarkably drop between 2024-235 (mainly because the EU will gradually reduce its reliance on Russian gas).
The EU will turn to LNG for the vast majority of its gas needs and the same goes for Japan, Korea, Southeast Asia and other Asian countries whose domestic production is set to decline over time. India will keep some of its locally produced natural gas but will be importing a large amount of it via LNG tankers. On the other hand, China is likely going to experience a massive increase in natural gas demand compared to the rest of the world. Although China will continue to produce a large amount of natural gas domestically, its pipeline imports are projected to go up by 40 billion cubic meters (most of the natural gas imported via pipelines will come from Russia) while its LNG imports in the current policy scenario are set to rise by 75 billion cubic meters by 2035. The stated policy scenario, instead, is slightly different:
In the stated policy scenario, more than 75% of the total LNG exports move towards Asian countries with China increasing its LNG imports by approximately 55 billion cubic meters by 2035 plus another 20 billion coming in via the Siberian and Far East Russian pipelines. In the stated policy scenario, China produces more natural gas locally, import less via pipelines while all the rest of the demand is satisfied via LNG tankers. India does not produce much domestically and imports all its gas needs via deep-sea vessels and the same goes for Southeast Asia and other Asian countries. In the stated policy scenario, several Asian economies will be increasingly rely on LNG because the competition between renewable sources and natural gas will drive the prices of the latter down favoring an increment in the volume of the LNG trade.
The European Union, instead, has a lower need for natural gas, at least in this scenario, because renewables are capable of satisfying a larger share of the aggregated European demand. The pipeline imports drop almost as severely as in the current policy scenario because the EU is trying to cut ties with Russian pipelines while all the rest of the demand gets satisfied by LNG imports sailing on deep-sea tankers. A more holistic view at the global natural gas trade flow identifies the main geographical and geopolitical distribution of demand and supply:
In the current policy scenario, it is fairly evident that Asia remains the top destination for natural gas although the European Union also becomes a key buyer by 2035 while the United Stated and the Middle East consolidate their positions as global exporters. In the current policy scenario, both exports towards the EU and Asia are almost entirely conducted via LNG and only a minor portion of gas export happens via pipelines which are predominantly used by African and small Asian exporters and Russia. The largest exporters of natural gas are the USA and Middle East countries with Qatar being the largest within the Middle East economies. These countries vastly prefer delivering natural gas via LNG vessels.
In the stated policy scenario, the USA consolidates its position as the largest exporter of LNG followed by the Middle East and in particular Qatar, which alone is responsible for a 20% increase in new LNG capacity up to 2035, according to the IEA. The trade flow towards the EU drops compared to the current policy scenario while the one towards Asian countries increases favored by a higher competition between renewables and traditional fuels which drive down LNG prices making it more attractive to emerging and developing economies. All in all, Asian countries in the most relevant scenarios are expected to become the largest importers of natural gas which will predominantly be exported using deep-sea vessels implying that LNG will dominate the global natural gas market. The European Union will be the second largest importer and even in this case LNG vessels will be the primary way to import gas into Europe. The USA is and will continue to be the largest LNG exporter in the world followed by Middle East countries and in particular Qatar. In any scenario, in the years to come, LNG will dominate globally.
The current HyperVolatility fundamental research is split into two parts and the first one ends here. The second and last part is called “The future of Energy in the IEA’s Current Policy Scenario (WEO 2025)”