The Age of Electricity is here -IEA

Electricity is becoming the most important source of energy, but the International Energy Agency warned that the world is entering a period of heightened energy insecurity marked by geopolitical volatility, rising demand, and growing technological vulnerabilities, in its latest World Energy Outlook report, released in November.

The agency called on governments to prioritise resilience and multilateral cooperation to navigate a rapidly changing landscape.

“Countries around the world are contending with pressing energy security threats and growing longer-term risks across an unprecedented range of fuels and technologies,” the agency said.

Energy has become a central issue in national security and economic planning, last seen during the 1973 oil crisis. The report presents three scenario-based trajectories – not forecasts – to help policymakers understand the implications of different pathways for energy supply, affordability, and emissions.

Common to all three, the IEA said, is the reality that demand for energy services will continue to grow over the coming decades, driven by increasing needs for mobility, temperature regulation, lighting, and, increasingly, data and artificial intelligence.

“Global investment in data centres is expected to reach $580bn in 2025,” the IEA said, “surpassing the $540bn being spent on global oil supply.”

It added that such demand “requires faster installation of new grids, storage and other sources of power system flexibility to ensure energy security.”

The AI revolution will be a major driver of rising power demand in the Global North, but accelerating economic growth will equally drive up demand in the Global South.

“The Age of Electricity is here. Across all WEO scenarios, electricity demand grows faster than overall energy use – and it is no longer limited to emerging and developing economies, with breakneck demand growth from data centres and AI helping to drive up electricity use in advanced economies, too,” the report says.

The report identified emerging economies — including India, Southeast Asia, and countries in the Middle East, Africa and Latin America — as playing a growing role in shaping global energy markets. These regions are seen as taking over from China, which since 2010 has driven half the growth in global oil and gas demand and 60% of electricity consumption growth.

While electricity is gaining a larger share in all scenarios, traditional vulnerabilities remain.

“Oil and gas markets have ample supplies in the near term,” the IEA said, “but remain exposed to geopolitical risks.”

The agency warned that weak transition policies or lower prices could spur faster demand growth and erode existing supply buffers.

New risks are also emerging from the global reliance on critical minerals, essential for electric vehicles, batteries and grids. The IEA noted that China dominates supplies, holding an average 70% market share in the refining of 19 out of 20 energy-related strategic minerals.

The IEA also pointed to a resurgence of nuclear power “after more than two decades of stagnation,” alongside continued rapid growth of renewable energy, led by solar photovoltaic.

However, it warned that “the world is falling short on the goals it set for itself on universal energy access and climate change.”

Despite all scenarios now breaching the Paris Agreement 1.5°C warming cap in the near term, the agency said it still “sees scope for avoiding the worst climate outcomes,” citing an updated net zero pathway that brings temperatures back below 1.5°C in the long run.

“In 2023, disruptions to critical energy infrastructure affected more than 200mn households,” the IEA reported. “Resilience is more important than ever.” It called for a return to the “same spirit and focus that governments showed when they created the IEA after the 1973 oil shock.”

Oil markets look bloated

“Global oil market balances are looking increasingly lopsided, with supply continuing to increase strongly while demand growth remains modest by historical standards,” the report said.

Oil markets are looking bloated as oil supply continues to rise well ahead of demand, raising concerns over a potential glut in 2025 and 2026. OPEC has opted for production increases as the Kingdom of Saudi Arabia (KSA) seeks to recapture some lost market share, which is already pushing prices down.

Global oil inventories rose significantly in 2025, with total stocks reaching 8,482mn barrels by the end of September — an increase of 304mn barrels (mb) since the start of the year, driven by higher OECD commercial stocks, non-OECD reserves, and rising volumes of oil at sea, S&P Global reported. In just the last months the IEA reports that global oil inventories increased by 77.7mn barrels in September, reaching their highest level since July 2021, with an average annual increase of 313mn barrels so far this year.

The IEA said global oil supply is projected to increase by 3.1mn barrels per day in 2025, followed by a further rise of 2.5mn barrels per day in 2026.

“Both OPEC+ and non-OPEC+ producers are expected to boost output,” the agency said. In contrast, global oil demand is forecast to grow by less than 800,000 barrels per day in both years, continuing a trend of modest growth due to economic uncertainty and accelerating electrification of transport.

“These trends are creating bloated market balances,” the IEA noted, adding that oil volumes stored at sea have been steadily rising. The agency said petrochemical feedstocks remain the largest driver of consumption gains, but “the sector has significantly underperformed expectations so far this year.”

Investment bank JPMorgan predicts oil prices may fall below $40 per barrel by late 2027 that would have a devastating effect on the Russian economy and make it difficult for many US oil producers to remain profitable.

Their projections indicate the market might see a surplus of up to 2.8mn barrels in 2026, slightly dropping to 2.7mn barrels in 2027. This could bring Brent down to $42 per barrel in 2027, and potentially as low as $30 if production cuts are not made. Nevertheless, JPMorgan thinks this extreme imbalance is unlikely, keeping its central forecast for Brent at $58 per barrel in 2026 and $57 in 2027, assuming voluntary cuts to help stabilize prices.

Although the oversupply outlook is becoming more pronounced, the IEA cautioned that downside risks remain, particularly due to geopolitical and economic uncertainties. “The economic repercussions of the recent tariff turmoil and the impacts of new sanctions on Russia are yet to become fully clear,” it said.

While oil markets remain central to the global energy system, the IEA also reported improved progress on energy efficiency — a key tool for reducing reliance on fossil fuels and cutting emissions. In its Energy Efficiency 2025 report, the agency projected that global primary energy intensity, the main measure of energy efficiency, will improve by 1.8% in 2025, up from just 1% in 2024.

“Several key economies, such as India and China, are showing some indications of stronger progress compared with their average since 2019,” the IEA said. However, it warned that current efforts are still insufficient to meet global climate targets. “The global rate of improvement falls well short of the goal of 4% by 2030 that was set at COP28 in Dubai.”

Despite signs of momentum, the IEA said governments must do more to ensure efficiency benefits are widely shared and fully realised.