The world is on the brink of a new age of electricity with fossil fuel demand set to peak by the end of the decade, meaning surplus oil and gas supplies could drive investment into green energy, the International Energy Agency says.
But it also flagged a high level of uncertainty as conflicts embroil the oil and gas-producing Middle East and Russia and as nations representing half of global energy demand have elections in 2024.
"In the second half of this decade, the prospect of more ample - or even surplus - supplies of oil and natural gas, depending on how geopolitical tensions evolve, would move us into a very different energy world," the agency's executive director Fatih Birol said in a release on Wednesday alongside its annual report.
Surplus fossil fuel supplies would likely lead to lower prices and could enable countries to dedicate more resources to clean energy, moving the world into an "age of electricity", Birol said.
Global oil demand peaks before 2030 in the report's scenarios based on government policies. (AP PHOTO)
In the nearer term, there is also the possibility of reduced supplies should the Middle East conflict disrupt oil flows.
Such conflicts highlight the strain on the energy system and need for investment to speed up the transition to "cleaner and more secure technologies", the agency said.
A record high level of clean energy came online globally in 2023, the agency said, including more than 560GW of renewable power capacity. Around $US2 trillion ($A3 trillion) is expected to be invested in clean energy in 2024, almost double the amount invested in fossil fuels.
In its scenario based on current government policies, global oil demand peaks before 2030 at just less than 102 million barrels a day, and then falls back to 2023 levels of 99 million barrels a day by 2035, largely because of lower demand from the transport sector as electric vehicle use increases.
The report also lays out the likely impact on future oil prices if stricter environmental policies are implemented globally to combat climate change.
In the agency's current policies scenario, oil prices decline to $US75 per barrel in 2050 from $US82 per barrel in 2023.
That compares to $US25 per barrel in 2050 should government actions fall in line with the goal of cutting energy sector emissions to net zero by then.
Forecast increase in demand for LNG will be outpaced by rising export capacity, the report says. (Joel Carrett/AAP PHOTOS)
Although the report forecasts an increase in demand for liquefied natural gas (LNG) of 145 billion cubic metres between 2023 and 2030, it said this would be outpaced by an increase in export capacity of around 270 billion cubic metres over the same period.
"The overhang in LNG capacity looks set to create a very competitive market at least until this is worked off, with prices in key importing regions averaging $US6.5 to $US8 per million British thermal units to 2035," the report said.
Asian LNG prices, regarded as an international benchmark are currently around $US13 per million British thermal units.