For one leading energy forecaster, the end of the Oil Age has drawn another step closer.
The International Energy Agency reaffirmed projections that demand for all fossil fuels will stop growing this decade as the world’s energy system shifts toward electricity. The organization also added a new element Wednesday, predicting that oil and gas prices will wilt during the next few years as surplus supplies build up.
“We’ve witnessed the Age of Coal and the Age of Oil — and we’re now moving at speed into the Age of Electricity,” the adviser to major economies said in its annual long-term report.
Crude price trends are bolstering the credibility of this bearish outlook. Clashes between Israel and oil heavyweight Iran — which in years past might have sent prices to triple digits — are barely supporting them near $75 a barrel, reinforcing the picture of a commodity that has lost its buzz.
The IEA’s outlook does contain plenty of caveats: Even as oil use declines, it will still account for almost a third of energy consumption by 2050.
But overall, the agency seems to have been emboldened by the success of its forecasts for this year. The prediction of a sharp deceleration in demand growth to barely 1% is looking far more accurate than those made by others such as the OPEC cartel.
Indeed, the Organization of Petroleum Exporting Countries took another step in acknowledging that its projections of a demand surge this year have proven optimistic, lowering its estimates for a third consecutive month.
A bleak future awaits the producer group in the IEA’s long-term view.
Rather than restoring halted output as they hope, Saudi Arabia and its partners may need to cut further in coming years just to defend prices near current levels. By 2030, they could be sitting on a hefty 8 million barrels per day of unused capacity.