The International Energy Agency (IEA) is warning that global energy systems are entering one of the most complex and risk-laden periods in decades, as geopolitical tensions, supply chain vulnerabilities and surging electricity demand reshape energy security challenges worldwide. The agency’s World Energy Outlook 2025 (WEO) report, released Wednesday, argues that diversification and international cooperation are now essential for governments navigating mounting uncertainties.
Countries are facing simultaneous threats across traditional fossil fuels, electricity systems, and the minerals critical to clean technologies—an unprecedented convergence that has placed energy at the centre of economic and national security planning. The IEA notes that the growing range of risks underscores the need for coordinated policies, resilient infrastructure and more globally dispersed supply chains.
The 2025 Outlook, widely regarded as the most influential global assessment of energy trends, examines three scenarios—each mapping out different policy choices and associated impacts. None are forecasts, but all highlight the structural pressures that governments and industries must confront over the coming decades.
A central trend in every scenario is accelerating global demand for energy services. Rising needs for mobility, heating, cooling, industrial processes and data-driven technologies mean total energy use continues to expand, even as countries invest heavily in cleaner systems.
Emerging economies are now driving the shift in consumption patterns. The report highlights that nations led by India and Southeast Asia, along with growing demand in the Middle East, Africa and Latin America, are taking over as primary engines of global market growth. While China accounted for half of global oil and gas demand growth and 60 per cent of electricity demand growth since 2010, the IEA notes that “no country or group of countries comes close to replicating China’s energy-intensive rise.”
At the same time, global energy security now hinges on far more than oil and gas. Supply chains for strategic minerals have become a profound vulnerability. “A single country is the dominant refiner for 19 out of 20 energy-related strategic minerals, with an average market share of around 70%,” the report states. These minerals, essential for batteries, EVs and power grids, also underpin AI chips, defence systems and aerospace manufacturing. The IEA warns that reversing this concentration will be slow without stronger government action.
IEA Executive Director Fatih Birol emphasized the scale of the challenge: “When we look at the history of the energy world in recent decades, there is no other time when energy security tensions have applied to so many fuels and technologies at once – a situation that calls for the same spirit and focus that governments showed when they created the IEA after the 1973 oil shock.” He added that policy responses must consider “the synergies and trade-offs that can arise with other policy goals – on affordability, access, competitiveness and climate change.”
Electricity remains the backbone of modern economies. In every scenario, electricity demand grows much faster than overall energy use, driven in part by rapid expansion of AI and data centre activity. “Last year, we said the world was moving quickly into the Age of Electricity – and it’s clear today that it has already arrived,” Birol said. Global data centre investment is expected to hit USD 580 billion in 2025, surpassing investment in oil supply for the first time.
Yet infrastructure is not keeping pace. While investment in generation has jumped 70 per cent since 2015, grid spending has climbed at less than half that rate—a gap that threatens system reliability.
Renewables, led by solar, continue to grow faster than any other energy source across all scenarios. Nuclear power is also undergoing a revival, with capacity expected to rise by at least one-third by 2035 through both traditional reactors and emerging small modular designs.
Despite geopolitical fragility, the IEA sees ample oil and gas supply in the near term. Prices in the USD 60–65 per barrel range and a significant wave of LNG capacity expected by 2030—much of it from the United States and Qatar—signal temporary easing. However, the agency cautions that “easing near-term market balances for oil and gas are no cause for complacency,” noting the sectors remain highly exposed to geopolitical disruptions.
In areas critical to global development, progress is lagging. Roughly 730 million people still lack electricity, and nearly two billion rely on unsafe cooking methods. Climate goals are falling short as well. WEO-2025 shows that the world surpasses 1.5°C of warming in all scenarios, though rapid emissions reductions could bring temperatures back below the threshold in the long term.
Meanwhile, the impacts of climate change are already destabilizing energy systems. In 2023, infrastructure disruptions affected more than 200 million households worldwide, with 85 per cent of incidents tied to grid damage. The IEA warns that rising temperatures, cyberattacks and extreme weather require urgent investments in resilience alongside decarbonization.
The report’s overarching message is clear: in a world defined by volatility and interconnected risks, resilient, diversified and cooperative energy strategies are no longer optional for governments—they are imperative.
