The energy world is taking a major, new twist. Fatih Birol, the head of the International Energy Agency (IEA) and the pundit of the energy world, is on the defensive. Until a few months back, the agency was insisting that global crude demand growth is stuttering and that the world would hit peak demand over the next few years — maybe as early as 2027. Not anymore.

In its flagship, much-awaited annual publication, the annual World Energy Outlook (WEO), released on November 12, the IEA stated that under a scenario based on existing policies and regulations, global demand for oil and natural gas would continue to grow well past this decade. It could continue to grow until 2050, the report said.

As per the report, global demand could rise to 105 million barrels per day (bpd) in 2035 and 113m bpd in 2050, from 100m barrels a day last year, WEO 2025 stated.

Meanwhile, the share of electric vehicles (EVs) in total car sales is also expected to plateau after 2035 due to insufficient policy support in most parts of the world, barring China and Europe. This slowdown is set to further drive oil demand growth into the 2030s and beyond, the IEA added. That is a big U-turn for the IEA.

The IEA backtracking on its earlier stance on highlighting renewables and the speedy adoption of EVs in favour of oil production does not bode well for Pakistan’s economy or climate

For the last few years, the IEA has been highlighting that renewables and the speedy adoption of electric cars were poised to take over, weaning the globe away from oil and gas in the years ahead. In September 2023, while talking to the Financial Times, Fatih Birol said that we are witnessing the beginning of the end of the fossil fuel era.

But Donald Trump’s arrival in Washington changed the scenario when the US withdrew from the Paris Accord. He evenwent to the extent of terming climate change a ‘hoax’ and a ‘con-job’.

Contrary to the stance of the Biden administration, ‘drill baby drill’ has been President Trump’s common mantra. Ever since returning to power, he has been urging American oil majors to expand domestic oil and gas production. Trump’s Energy Secretary Chris Wright has also been calling the IEA’s demand peak projections “nonsensical.”

The US stance also helped change the global aversion to fossil fuels. Many countries, including Canada and the UK, followed suit, directing their focus once again on building new infrastructure to utilise their fossil fuel assets.

Changes in US policies towards greater reliance on fossil fuels and the potential for a slower-than-expected take-up for EVs could now alter the calculus, Giulia Petroni wrote in The Wall Street Journal.

The IEA was feeling this heat from the Trump administration. It cannot remain oblivious to it. After all, the US is the agency’s largest contributor. The change in the IEA’s stance also needs to be seen in this perspective.

But the Paris-based energy security watchdog has also warned that the world will likely fail to meet the goal to cap the rise in temperatures as close as possible to 1.5 degree Celsius, above pre-industrial times, to avoid the most devastating effects of climate change. And for the worst-affected countries of climate change, such as Pakistan, this is a death knell.

During the Biden administration, the IEA was of the firm view that if the world wanted to reach net zero emissions by mid-century, there should be an end to investment in new oil, gas and coal projects. The issue of climate change is now being pushed to the back burner.

In view of this IEA U-turn, investment banks are also beginning to revise their oil demand predictions considerably higher than the previous ones. A Bloomberg report citing a note by Goldman analysts is projecting that the global oil demand could expand to 113m bpd by 2040, as against the 103.5m bpd in 2024.

Goldman Sachs underlined that the upward revision of its previous estimates of the global oil and gas consumption was the result of slower-than-expected progress of net-zero policies, including infrastructure obstacles to the expansion in wind and solar generation capacity, as well as a slower-than-expected adoption of electric vehicles.

“We do not assume major breakthroughs in low-carbon technology,” Sach’s analysts wrote in their note. “Even for peaking road oil demand, we expect a long plateau after 2030,” they added.

The Organisation of Petroleum Exporting Countries (Opec), which has long argued that peak demand is not in sight, stands vindicated. “We hope we have passed the peak in the misguided notion of ‘peak oil’,” Opec said on its website last Wednesday, after the release of the IEA’s World Energy Outlook 2025.

The IEA’s past statements that peak fossil fuel demand was imminent have come back to haunt the agency. Although the debate over whether the IEA was forced to make this U-turn under Trump’s pressure, or that it has been taken after taking a professional view of the current global energy scenario, will continue for some time to come. But while the debate continues, it is time for the oil producers to take a sigh of relief.

This is no good news for Pakistan, both from a climate change perspective as well as from a market viewpoint. This could result in firming up market sentiments and raising oil prices, impacting Pakistan’s already precarious balance of payments adversely, in the years to come.

The writer is an energy analyst and has delivered talks at the Department of Energy in Washington and the International Energy Agency.

X: @rhusainsyed

Published in Dawn, The Business and Finance Weekly, November 24th, 2025