Short-term gains can’t hide oil’s long-term decline

Forecasters say the clock is ticking on oil demand as global supply surges and electric vehicles gain ground

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Summer demand is giving oil prices a temporary lift—but don’t be fooled.

Despite a seasonal uptick in oil demand driven by travel and power generation, the long-term outlook for global oil markets remains weak.

Rising production, slowing demand and structural changes like the growth of electric vehicles point to an industry facing sustained pressure. While key forecasters disagree on the timing, the direction is clear: oil’s dominance is under threat.

The Paris-based International Energy Agency (IEA), a group that advises developed countries on energy policy, has raised the alarm. In its most recent monthly oil report, it projected that global oil supply will grow three times faster than demand in 2025. It now expects supply to increase by 2.1 million barrels per day (bpd), up 300,000 from its previous estimate. Meanwhile, it trimmed demand growth to just 700,000 bpd, marking the weakest demand increase outside the pandemic years since 2009.

Looking ahead to 2026, the IEA forecasts supply to grow by nearly 1.3 million bpd, while demand will rise by only 720,000 bpd. That widening gap signals oversupply conditions that could weigh on prices. When supply grows faster than demand, prices tend to fall, which can hurt producers, investors and oil-dependent economies.

While the IEA notes a seasonal lift in demand driven by increased travel and electricity use during the Northern Hemisphere summer, it maintains that these gains are only temporary. Crude burned in refineries to power air conditioners is expected to double to 900,000 bpd over the summer, and refinery throughput will climb by 3.7 million bpd between May and August.

“The decision by OPEC+ to further accelerate the unwinding of production cuts failed to move markets in a meaningful way given tighter fundamentals,” the IEA said in its report.

Refining margins—the profits refiners make from turning crude into gasoline and diesel—remain strong, and forward pricing shows signs of stress. Oil for immediate delivery now costs more than oil for future delivery, a typical sign that supply is running tight.

OPEC, the Organization of the Petroleum Exporting Countries, is more optimistic but is beginning to temper its expectations.

In its latest World Oil Outlook, the group cut its demand forecasts for 2026 through 2029, citing slowing Chinese growth, even as it maintained a bullish long-term view based on rising consumption in developing countries. The revised 2026 forecast of 106.3 million bpd is down from 108 million, while the 2029 projection was lowered by 700,000 bpd from last year’s estimate.

The divergence between the IEA and OPEC highlights the uncertainty in the market but also the growing realization that oil’s growth trajectory may be flattening. BP and the IEA both expect demand to peak this decade, with the IEA forecasting a high of 105.6 million bpd in 2029, followed by a decline in 2030.

Underlying all these projections is a clear trend: the global energy mix is changing. The growing adoption of electric vehicles, despite some transitional hiccups, is starting to erode oil’s long-term dominance. While oil remains indispensable today, its future is far less secure. Short-term signals may calm markets for now, but unless demand growth surges unexpectedly, oil producers could be facing a decade of persistent oversupply and softening prices.

Toronto-based Rashid Husain Syed is a highly regarded analyst specializing in energy and politics, particularly in the Middle East. In addition to his contributions to local and international newspapers, Rashid frequently lends his expertise as a speaker at global conferences. Organizations such as the Department of Energy in Washington and the International Energy Agency in Paris have sought his insights on global energy matters.