The International Energy Agency forecasts that oil and natural gas prices will likely be lower over the next five years, providing relief to consumers who have experienced price spikes in recent years. This projection is based on an expected increase in oil and gas supplies in the second half of the decade, as long as geopolitical tensions in the Middle East and Russia’s actions in Ukraine do not disrupt current trends. The IEA’s Executive Director, Fatih Birol, highlighted the potential for downward pressure on prices, signaling a shift towards a different energy world compared to the recent global energy crisis.
The report emphasizes the importance of a faster transition to clean energy to address the climate crisis and global energy security concerns. While fossil fuel prices are expected to decline, governments must seize the opportunity to invest in clean energy transitions and remove inefficient subsidies to further combat climate change. The IEA stresses that government policies and consumer choices will play a crucial role in shaping the future of the energy sector and addressing climate change.
The IEA also highlights the increasing adoption of clean energy technologies, which are becoming more affordable when considering lifecycle costs. While upfront costs may be higher than conventional options, clean energy technologies often have lower operating costs and shield consumers from fossil fuel price volatility. Additionally, extreme weather events intensified by climate change have disrupted energy infrastructure and supply chains, leading to temporary price surges. The IEA warns that such costs are expected to rise, especially if global temperatures increase significantly.
Despite the IEA’s projections that demand for oil, natural gas, and coal will peak by the end of the decade, the world is still far from being on a trajectory aligned with net-zero goals. Scientists argue that global greenhouse gas emissions must reach zero by 2050 to keep global warming below 1.5 degrees Celsius. Current policies are insufficient, with the world tracking towards a 2.4-degree increase in global average temperatures by the end of the century. The IEA emphasizes the urgent need for decisive action to accelerate the transition to clean energy and reduce emissions.
The report also highlights the increasing global oil output, driven primarily by producers in the United States and other countries in the Americas. The IEA expects a significant increase in liquefied natural gas supply over the next five years, mainly from the US and Qatar. This oversupply of oil and liquefied natural gas, combined with excess manufacturing capacity for key clean energy technologies, sets the stage for a buyer’s market, according to Birol.
The forecasted decline in fossil fuel prices presents challenges and opportunities for both consumers and policymakers. While lower prices can provide relief to consumers, governments must use this opportunity to accelerate investments in clean energy transitions and remove fossil fuel subsidies. The IEA emphasizes that the future of the energy sector and climate change mitigation efforts will depend on the decisions made by governments and consumers in the coming years.
