The International Energy Agency (IEA) has released its annual World Energy Outlook, projecting that global demand for all fossil fuels will plateau this decade, while renewable energy will account for nearly half of the world’s power generation by 2030. The report suggests that for the world to meet its net-zero emissions target by 2050, global oil demand must decrease from 103 million barrels per day (MMbbl/d) to around 85 million barrels per day by 2030. This would require a yearly decline of 3 to 4 million barrels per day throughout the decade.
The IEA’s cautious outlook for oil demand mirrors similar forecasts from Bloomberg. In April, Bloomberg predicted that global demand for road fuel would continue to rise for just another four years, peaking at 49 million barrels per day in 2027, before entering a steady decline. Factors such as electric vehicles (EVs), improved fuel efficiency, and the rise of shared mobility are expected to lead the charge. Bloomberg estimates that EVs could replace up to 20 million barrels per day of oil demand by 2040, a dramatic increase from the 2 million barrels per day currently displaced. According to Bloomberg, the demand for gasoline and diesel in road transport has already peaked in the U.S. and Europe, and is set to peak in China by 2024. In the 2030s, demand in other major oil-consuming countries like India is also expected to decline.
However, some analysts remain skeptical about these predictions. Al Salazar from Enverus Intelligence Research disagrees with the bearish outlook. In a recent interview with CBC’s The Eyeopener, Salazar pointed out that the 85 million barrels per day forecast is still 6 million barrels less than oil demand during the COVID-19 pandemic, when demand plummeted to around 91 million barrels per day. This drop in demand sent oil prices into negative territory for the first time in history.
Salazar also noted that the EV revolution is facing significant challenges. For instance, China’s renewable energy and EV sectors are encountering roadblocks, partly due to the growing trade tensions between the U.S. and China. The Biden administration has continued to impose tough tariffs on Chinese goods, including electric vehicles, batteries, solar cells, and critical minerals. In response to these tariffs, the U.S. Trade Representative (USTR) recently announced plans to raise duties on Chinese imports, with new tariffs set to take effect in September 2024. The tariffs on electric vehicles, in particular, are steep—ranging from 25% on lithium-ion batteries to 50% on photovoltaic solar cells.
The European Union is also considering tariffs on Chinese EVs. A year-long investigation concluded with a recommendation to impose duties between 8% and 35% on Chinese-made electric vehicles. An informal vote on the issue in July saw broad support for the tariffs, suggesting they will likely be approved. These duties could delay the transition to EVs in the EU, but they also risk escalating trade tensions with China, which has already threatened to impose retaliatory tariffs on European products such as luxury cars, wine, and pork.
Meanwhile, former U.S. President Donald Trump has suggested that he would raise tariffs on all imports, with a specific focus on China. His proposed 10-20% tariff on all imports could exacerbate the current trade dispute and further benefit U.S.-based companies like Tesla. Investors seem to share this view, as shares of Tesla have surged over 20% since Trump’s November 2024 presidential bid gained traction. Wedbush Securities analyst Dan Ives believes that if Trump returns to the White House, it could fast-track developments in artificial intelligence (AI) and autonomous vehicles for Tesla, giving the company a significant competitive edge.
Ives noted that Tesla could unlock a $1 trillion opportunity in AI and autonomous driving, especially if federal regulations are eased under a potential second Trump administration. The stock market appears to be betting on this outcome, with Tesla’s share price reflecting optimism about future growth in the autonomous vehicle and AI sectors.
As the energy landscape evolves, both oil demand forecasts and the growth of electric vehicles face significant uncertainties. While some analysts predict a rapid shift away from fossil fuels, others caution that geopolitical tensions and technological hurdles could delay or reshape this transition.
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