Crude surplus and clean energy boom to lower energy prices this decade, IEA says

At current pace, low-emission sources will generate more than half of the world's electricity by 2030, agency says

Fuel storage tanks in Boston, Massachusetts, US. The IEA has projected an 'overhang' of oil and liquefied natural gas supply. EPA

The world is set to enter a new energy era, with an oil and gas surplus and a surge in renewable energy manufacturing bringing down prices for consumers, the International Energy Agency said on Wednesday.

Based on current policies, the Paris-based agency has projected an “overhang” of oil and liquefied natural gas supply, along with a surge in manufacturing capacity for key clean-energy technologies, particularly solar PV (photovoltaic) and batteries, in the second half of the decade

“The prospect of more ample – or even surplus – supplies of oil and natural gas, depending on how geopolitical tensions evolve, would move us into a very different energy world from the one we have experienced in recent years during the global energy crisis,” Fatih Birol, the IEA’s executive director, said in its annual World Energy Outlook report.

“It implies downward pressure on prices, providing some relief for consumers that have been hit hard by price spikes,” Mr Birol said.

“The breathing space from fuel price pressures can provide policymakers with room to focus on stepping up investments in clean energy transitions and removing inefficient fossil fuel subsidies.”

Oil and gas markets have experienced significant volatility over the past two years, primarily due to Russia's invasion of Ukraine, which prompted Europe to decrease its dependence on Russian energy supplies.

Meanwhile, the continuing conflict in Gaza has increased the likelihood of a full-scale war in the Middle East, a region responsible for roughly a third of global oil production.

The IEA report says that under current policies, low-emission sources will generate more than half of the world's electricity by 2030, while demand for coal, oil, and gas is expected to peak by the end of the decade.

Although clean energy is being installed at an “unprecedented” rate, the deployment is “far from uniform” across technologies and markets, the agency said.

Investment in the global energy sector is expected to surpass $3 trillion for the first time this year. For every $1 spent on fossil fuels, nearly $2 will be allocated to various clean energy technologies and infrastructure, the IEA said.

Emerging and developing countries, which make up two-thirds of the world's population, account for just 15 per cent of global clean energy investments, while advanced economies and China dominate with 85 per cent, the agency said.

“As with many other global energy trends today, China is a major part of what is happening,” Mr Birol said.

“Whether it’s investment, fossil fuel demand, electricity consumption, deployment of renewables, the market for EVs, or clean technology manufacturing, we are now in a world where almost every energy story is essentially a China story.”

China's solar growth is advancing so rapidly that, by the early 2030s solar power generation in the country could surpass the current total electricity demand of the US, Mr Birol said.

Despite growing momentum behind the transition to clean energy, the world is still a “long way” from a trajectory aligned with its net zero goals, the agency said.

Current policies will cause global carbon dioxide emissions to peak soon, but without a sharp decline, the world is headed for a 2.4°C temperature rise by 2050, exceeding the Paris Agreement's 1.5°C target, the report added.