WEO 2024: A Buyers' Market for Fuels Is Coming. Importers Should Use It Wisely

The International Energy Agency's World Energy Outlook 2024, published on 16 October, makes two arguments that matter for every energy-importing economy. The first is that the world is entering what the agency calls an Age of Electricity, with electricity demand growing at twice the pace of overall energy use and set to add the equivalent of Japan's entire electricity consumption to global demand every year in its Stated Policies Scenario. The second is that the second half of the 2020s is likely to bring an overhang of oil and liquefied natural gas supply, alongside a large surplus of manufacturing capacity for solar panels and batteries.

In the agency's words, buyers and consumers may have the edge in energy markets for a time. Our view is that this is the most useful framing the IEA has offered in several years, because it shifts attention from long-term targets to a near-term market opportunity. On oil, the IEA expects demand growth to slow sharply because China, the engine of oil market growth for two decades, is switching to electricity in road transport. On gas, around 270 billion cubic metres a year of new LNG export capacity has been approved and is set to come online by 2030, led by the United States and Qatar.

Electricity demand projections in the Stated Policies Scenario are 6 per cent, or 2,200 terawatt hours, higher in 2035 than in last year's Outlook. Renewable capacity rises from about 4,250 gigawatts today to nearly 10,000 gigawatts in 2030 in the Stated Policies Scenario. The IEA also notes that importers in Asia face a long-term rise in dependence on imported oil and gas, to nearly 90 per cent for oil and around 60 per cent for gas by 2050 in the Stated Policies Scenario.

The Outlook was written against a backdrop of conflict in the Middle East and Russia's war in Ukraine, and it acknowledges that the risk of further disruptions is very high. WEO 2024 is a valuable corrective to the idea that energy markets will remain tight indefinitely.