Renewable power sources and natural gas are making significant ground in the race to meet energy demand over the next 40 years, according to the latest edition of the World Energy Outlook.
The International Energy Agency’s flagship publication also found increased risk of shortage of oil and gas supplies due to diminished investment.
The report said that the era of fossil fuels is far from over, even in light of the Paris Agreement on climate change.
However, new government policies and technological improvements will allow increased energy efficiency and lower cost renewable technologies.
Use of natural gas will continue to expand while that of coal and oil will diminish.
“We see clear winners for the next 25 years – natural gas but especially wind and solar – replacing the champion of the previous 25 years, coal,” said Fatih Birol, the IEA's executive director.
“But there is no single story about the future of global energy: in practice, government policies will determine where we go from here.”
Record falls in investment levels in oil and gas production are raising the risk of a shortfall in supply.
If 2017 sees yet another year of lower upstream oil investment it would create a significant risk of a shortfall in new supply within a few years, the report found.
Even though the growth of renewables is likely to reduce dependence on oil, it is essential that long-term investment in oil and gas keeps pace.
“Increased LNG shipments also change how gas security is perceived. At the same time, the variable nature of renewables in power generation, especially wind and solar, entails a new focus on electricity security,” said the report.
Global oil demand will continue to grow until 2040 due to the lack of suitable alternatives in sectors like road freight, aviation and petrochemicals.
And this is likely to be accompanied by increased oil price volatility, the report found.
Birol said: “If oil prices rise in the short term, then shale producers can react quite quickly to put more oil on the market, producing a see-saw movement.
“And if we continue to see subdued investments in new conventional oil projects, this could have profound consequences in the longer term.”
Demand for oil to power passenger cars will decline by 2040 even as the number of vehicles on roads doubles.
This will be due to efficiency improvements, biofuels and rising ownership of electric cars.
Coal consumption and will barely grow in the next 25 years as demand in China falls due to concerns over air pollution and a desire to diversify fuel supplies.
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