Oil’s share of energy demand dips below 30% for first time

• International Energy Agency report
• Oil made up 46% of total 50 years ago
• Analysts expect ‘limited’ impact on Gulf

Oil’s share of the global energy mix has hit a historic low, dipping below 30 percent of demand for the first time as renewables and electric vehicles reshape markets, according to the International Energy Agency.

The IEA’s Global Energy Review 2025 reveals that energy demand rose by 2.2 percent last year, outpacing the average yearly increase of 1.3 percent between 2013 and 2023. 

However, oil’s proportion of total demand, which stood at 46 percent half a century ago, has fallen.

Electricity consumption rose by 4.3 percent last year, which the IEA attributed to heatwaves, an increase in data centres and industrial electrification.

Renewable sources and nuclear power collectively accounted for 80 percent of the rise in global electricity generation last year – and contributed 40 percent of total generation for the first time.

The IEA report does not explicitly mention Gulf energy trends, but analysts are confident the region’s oil producers will not be greatly affected by the changes in demand.

Ole Hansen, head of commodities strategy at Danish lender Saxo Bank, told AGBI there was “limited scope for higher prices in the medium term”, but demand for Middle East crude oil would “remain strong in the coming years, especially once non-Opec+ production growth slows”.

The IEA said 7 gigawatts of nuclear power were added worldwide in 2024. Six large-scale reactors were connected to electricity grids, including one in the UAE.

Demand for natural gas rose by 2.7 percent last year – the most among fossil fuels. Oil demand growth slowed to 0.8 percent, the IEA said, in part because of electric vehicles. They now account for one-fifth of global car sales. 

Coal use edged up by 1 percent, driven by cooling needs in China and India.

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Arun Leslie John, chief market analyst at Century Financial in Dubai, said the Middle East as a whole could expect slower economic growth because of slowing oil demand, but “certain nations like the UAE are expected to defy the trend amid their robust diversification”.

“The breakeven oil prices for Qatar are significantly lower than the current oil price. Hence, Qatar may also be minimally affected in the short term,” John said.

In countries such as Kuwait, Iraq and Saudi Arabia, where the dependence on the oil and the fiscal breakeven price is higher, the adverse effect could be more significant.

Economic strategies could mitigate this, he said. “As all these nations have diversification efforts already in place, like Saudi Arabia’s Vision 2030, Kuwait’s Vision 2035 and Qatar’s National Vision 2030, the impact is expected to be reduced.”