IEA’s World Energy Outlook Predicts Coming “Turning Point” in the Global Energy Order

Fallout from the Russo-Ukrainian conflict has created a global energy crisis that may lead to a dramatic shift in the “global energy order”, according to the International Energy Agency’s (IEA) most recent World Energy Outlook (WEO). Though natural gas has become a weapon of war, the IEA’s analysis shows that gas and other fossil fuels are poised to become casualties in the long term. The WEO is an annual report published by the IEA that provides a “dispassionate analysis” of the world’s current energy realities. Their analysis uses multiple scenarios based on current and proposed energy policies of the world’s governments and data to forecast plausible future outcomes. This year’s WEO sheds light on the bleak current status of the global energy order, stating that the world is currently “in the midst of its first global energy crisis” which was “sparked” by the Russian invasion of Ukraine. The severity of this crisis is “of unprecedented breadth and complexity”. Fossil fuels, especially natural gas, have played a crucial role in the current crisis. Curtailment of natural gas exports from Russia into Europe in response to western sanctions and condemnation of the major energy exporter has led to increased prices at both the commodity and consumer levels as new relationships were made to attempt to meet European demands. The economic effects of the energy crisis are widespread, raising energy costs for everyone, which is especially damaging to individuals and families already struggling economically. The WEO states that for the first time in its history, the “total number of people worldwide without electricity has started to rise”. However, the IEA’s analysis indicates that for the first time ever the Stated Policies Scenario, one of the scenarios used to craft the WEO, sees global demand for fossil fuels peaking or plateauing. This is a striking change, as fossil fuel demand has only risen since the start of the industrial revolution. The agency further explains that its models show fossil fuel demand beginning to decline by the end of this decade, and continuing to fall through mid-century. The causes of this change in fossil fuel demand are wide and varied, but current policies promoting and incentivizing investments in renewable energy, and market success of alternative-fueled vehicles are expected to continue to shift demand patterns in the coming decades.