The International Energy Agency’s (IEA) newly released 2025 World Energy Outlook marks a return to normalcy for the agency.
After straying from its original energy security mission in favor of championing renewable energy, IEA has reinstated its policy-neutral reference case: the “Current Policies Scenario” (CPS). A return to CPS fulfills IEA’s founding mission to provide factual, reliable information about current and future energy demand.
This is part of a greater shift by the agency, as Bloomberg reports:
“The report on Wednesday is another shift in tone for the agency, which in September said that billions of dollars need to be invested in new oil and gas supplies — having previously drawn fire for saying that such investment was incompatible with climate goals.”
Return of the Baseline Case
IEA quietly abandoned CPS in 2019 amid heavy pressure from environmental activist groups. It opted instead for a “Stated Policies Scenario” (STEPS), an “exploratory” scenario based on climate policies not codified into law. The IEA’s use of STEPS led to a preoccupation with the energy transition, distorting projections of future demand for oil and natural gas.
As Energy in Depth has previously analyzed, the removal of the baseline case faced widespread backlash from energy sector experts and lawmakers, resulting in mounting pressure for IEA to its original energy security mission.
Many energy experts pointed out how the removal of the baseline case – and reliance on STEPS – had damaging ripple effects on energy policy. The STEPS case was used as justification for the dangerous LNG export pause under the Biden Administration, threatening global energy security during a period of LNG demand growth and instability abroad driven by the Russia-Ukraine war.
IEA’s return to CPS is a positive step for the agency to regain credibility and restore sound decision-making to energy policy. As Bob McNally of Rapidan Energy Group noted:
“By un-cancelling a business-as-usual reference case, the influential IEA should shift investor consensus closer to reality, help policymakers weigh energy policy trade-offs, and bolster energy security…”
IEA: World Remains “Thirsty for Energy”
2024 marked a record-breaking year for energy consumption. According to IEA, fossil fuels made up the vast majority of that demand, providing essential energy to consumers worldwide.
In this year’s World Energy Outlook, IEA projects that oil and natural gas demand is set to grow well into the future – in both its CPS and STEPS scenarios.
Under current policies, global oil and gas demand is projected to grow through 2050, a retreat from IEA’s previous suggestion that oil and gas demand could plateau by 2030. Both CPS and STEPS project an increase in energy demand, with the curve shifting “up and to the right”:
Source: IEA World Energy Outlook 2025
While STEPS anticipates a more conservative increase based on the implementation of theoretical energy transition policies, it still projects that global consumption in 2035 will be 1.3 million barrels higher than its 2024 projection.
Notably, countries ranging from Canada to Sweden have loosened their emissions reduction goals in the last year – suggesting the “direction of travel” implied in STEPS may not be overwhelmingly in favor of renewable energy and electrification.
Source: IEA World Energy Outlook 2025
New Oil and Natural Gas Infrastructure Needed
In this year’s WEO, IEA struck a much different tone towards investment in new oil and natural gas production. As S&P Global reports:
“’Declines in production from existing fields and continued growth in consumption run through today’s overhang of oil supply relatively quickly,’ the IEA said in its report, estimating that the world will need the equivalent of an additional 25 million b/d in new projects over the next decade to maintain market equilibrium.
“That view marks a departure from the base case presented in the IEA’s previous annual World Energy Outlook, which indicated that the risk of underinvestment had “receded” due to bearish indicators suggesting a 2030 oil demand peak.”
Recall that IEA’s headline-grabbing claims that oil demand would peak before the end of the decade were derived from its use of a STEPS scenario – not a policy-neutral baseline. The CPS demand scenario – which has historically tracked closely to real-life demand outcomes – paints a much different picture of the necessity for new oil and natural gas investment.
Bottom Line: After widespread criticism, the IEA’s return to the Current Policies Scenarios in its 2025 World Energy Outlook is a win for credibility and energy realism. With energy demand continuing to rise, policy-neutral analyses are essential to allow oil and gas to continue to meet global energy needs.
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