Bottom Line Up Front: Despite ambitious global targets, the 2025 International Energy Agency (IEA) World Energy Outlook 2025 sends a clear signal: the politics and practicalities of the energy transition are driving dramatic increases in electricity demand alongside a slower shift away from oil and liquid fuels. Biofuels – already delivering significant GHG reductions – will remain central to policy-driven decarbonization of transportation as electricity is drawn down for use in other sectors. Organizations must adapt, invest in rigorous scenario planning, and leverage expert guidance to navigate this complex energy future.
The International Energy Agency (IEA) has just released its landmark 2025 World Energy Outlook, a report that acts as both a compass and a cautionary tale for industry leaders across the energy spectrum. For Stillwater Associates’ clients and our readership – who are often focused on micro trends in transportation fuels – this macro assessment is worth attention. The new assessment reveals seismic shifts in global energy demand, security risks, and the likelihood that the world will overshoot the 1.5°C climate threshold, sending an unmistakable signal to executives seeking to future-proof their organizations. In this article, we highlight key takeaways from the 519-page World Energy Outlook.
- Rising Energy Demand (and the new drivers)
While global economic growth continues to fuel higher energy demand, the drivers have shifted: not only are traditional sectors like transportation and industry accelerating, but demand from data centers, artificial intelligence, and electrified services are set to dramatically reshape the energy landscape. Breakneck investment in electricity infrastructure (including transmission facilities, transport grids, and battery storage) now dominates the energy market, with electricity supply and end-use now accounting for over half of global energy investment. - Supply Chain Vulnerabilities: Minerals and Technology Risk
Security risks have expanded far beyond oil and gas. The availability and cost of critical minerals – vital for electricity grids, batteries, EVs, and more – are now top concerns, with supply chains highly concentrated in a handful of mineral refining countries. Firms relying on electrification, clean tech, or large-scale storage solutions should urgently assess supply chain risks and develop contingency plans. - The Age of Electricity & the Acceleration of Renewables
Electricity demand is set to outpace all other energy services. Renewables, led by solar PV, will grow faster than any other energy source across scenarios. Nuclear energy is experiencing a revival after decades of stagnation. For companies planning capital improvements, it’s crucial to factor in how shifting policies might accelerate renewable integration or strain existing grid infrastructure (all of which affect project feasibility and cost). - Peak Oil Pushed Back:
The IEA has reintroduced its Current Policies Scenario (CPS), which projects that global oil demand may continue growing through 2050, instead of peaking in the 2030s as previously anticipated. This is driven in large part by slower-than-expected adoption of EVs, especially in some major markets. The politics and commercial realities at both U.S. and global levels are slowing the energy transition, making the path to peak oil and net zero far more uncertain than last year’s projections. - Oil, Gas, and LNG: Ample Supply but Fragile Security
Though current market balances suggest ample oil and gas supply, geopolitical risks remain ever-present. IEA’s 2025 World Energy Outlook notes an imminent surge in LNG supply, primarily from the U.S. and Qatar, which could reshape gas markets worldwide. However, weak energy transition policies or lower prices could erode these buffers, so the stability many executives are banking on may be short-lived. - Climate and Access Gaps: Implications for Policy and Planning
Perhaps most sobering are IEA’s climate findings: “far from limiting global warming to 1.5°C or well below 2°C, we are currently heading towards outcomes in the range of 2.5-3°C, with severe implications for lives and livelihoods around the world.” Universal energy access also remains out of reach for millions, a challenge compounded by resilience gaps (e.g., the vulnerability of infrastructure to extreme weather and cyberattacks). For businesses, this means that climate risk analysis and adaptation planning are no longer optional.
What does this mean for transportation energy markets?
Rapid growth in electricity demand driven by electrification of transport can be expected to fundamentally reshape transportation fuel markets:
- Reduced Oil Demand for Transport: EV adoption curtailed global oil consumption by over 1.3 million barrels per day in 2024. As more EVs hit the road, traditional gasoline and diesel consumption will see erosion. However, it is no longer realistic to frame rapid electrification as inevitable. The IEA’s reinstated CPS finds that the pace of EV adoption is slowing, particularly under current U.S. policy and infrastructure realities. As a result, road transport and other sectors will remain dependent on liquid fuels (including gasoline, diesel, and biofuels) for longer than anticipated.
- Fossil Fuel Shifts Rather than Elimination: Electrification doesn’t immediately eliminate fossil fuel use – grid reliability challenges and peak demand may increase reliance on natural gas-fired power or delay the full decarbonization of the mobility sector.
- New Volatility and Infrastructure Pressure: Electricity systems must absorb sharply higher demand, not only increasing the need for resilient grids but also exposing transportation to electric power price volatility and reliability risks. Wholesale prices for electricity, especially in major markets like the EU and U.S., have experienced significant recent upticks and volatility.
- Infrastructure Investment and Policy Risk: Companies in the transportation space must now make investment decisions factoring in not just fuel supply, but also charging infrastructure, grid stability, and regional policy changes impacting demand (e.g., zero-emission zones, battery incentives, etc.).
How Stillwater Can Help: Strategic Navigation in Turbulent Times
New macro trends call for new strategies. Stillwater Associates offers our clients expert analysis and scenario planning:
- Policy Intelligence & Carbon Markets Expertise: Offer scenario-based analysis of evolving carbon markets (LCFS, RFS, ZEV credits) and advise on strategic compliance and trading approaches, using Stillwater’s proprietary modeling and insights to plan for a range of climate and policy outcomes. With CPS indicating higher long-term oil demand and slower energy transition, sound scenario-based planning and adaptive compliance strategy are more critical than ever. Stillwater’s expertise helps clients understand real-world risks and opportunities.
- Strategic Advisory on Partnerships & New Ventures: Help clients identify opportunities for partnering with utilities, technology providers, and infrastructure funds – guiding clients through the rapidly evolving value chain and helping match technology to specific operational needs.
- Custom Education & Communication: Provide tailored briefings and training for executive teams and boards, distilling these complex sectoral changes into actionable insights and supporting leadership in navigating disruptive change.
As the energy landscape grows more complex and uncertain, access to trusted, timely, and nuanced analysis is indispensable. Stillwater’s deep experience across transportation fuels, carbon markets, and regulatory compliance ensures our clients aren’t merely reacting to the headlines – they’re prepared to lead in the new energy era. If the findings of the IEA World Energy Outlook 2025 have raised questions for your organization, contact us to discuss tailored solutions for your specific challenges and goals. Let’s work together to turn disruption into opportunity.