The global energy market is on a course correction – the prevailing discourse over the past decade has been that fossil fuels are on the way out, electric vehicles and other green technologies are the future, and that there is an inevitability of a green transition. This discourse had prioritised ideology over facts.
The International Energy Agency (IEA), originally set up by Western governments to deal with the oil shocks of the 1970s, is a case in point. For the past several years, including in its 2024 World Energy Outlook, the IEA has projected that global oil demand will peak before 2030. The IEA has now dramatically changed its position – in its latest World Energy Outlook 2025, published in November 2025, the IEA now projects that oil demand will continue to rise till 2050. For a body set up to specifically monitor energy data, this is a spectacular failure – and came about from prioritising advocacy (for green energy) over analysis and data. As the IEA-proclaimed 2030 deadline drew closer, reality became impossible to ignore, leading to revised projections.
The first rude awakening came in mid-2025, when China, which has a near-monopoly on several electric-vehicle-related minerals, imposed export restrictions on rare-earth magnets, ostensibly to stop their use in weapons. This effectively stopped supply to the U.S., India, and several other countries. Top Indian automakers, including Maruti Suzuki,[i] Ather Energy, and Bajaj Auto,[ii] had to cut down electric vehicle (EV) production in response to the curbs.
The third issue stems from the Russia-Ukraine conflict, which has seen the European Union decouple from Russian energy. Europe’s energy consumption in 2024 was 8% lower than the Covid-depressed 2021 energy consumption. Reduced energy consumption indicates that industrial activity has fallen,[iii] with nearly 1 million industrial jobs lost[iv] to China.
Finally, in the short term, the oil market is well supplied – with prices in the $60-$65 per barrel range – despite various ongoing conflicts. With a possible settlement of the Russia-Ukraine conflict, the price will continue in this band, which is good for India.
Why do these developments matter to India? In the next five years, fossil fuels – oil, gas and coal – will continue to account for a vast share of new energy. India needs to invest accordingly in its power infrastructure. The optimism around renewable energy, coloured by ideology rather than facts as witnessed in IEA’s poor forecasts, should be subdued till then.
The adoption of promising new technologies should be pursued but not create dependencies or be vulnerable to single points of failure – the global dependence on China for rare earth magnets, for instance. The Chinese embargo should be a wake-up call for all industries and infrastructure to resist being pushed into niches where they are vulnerable to geopolitical blackmail or untested supply chains.
Finally, India’s oil demand, currently at 4.5 million barrels a day, will increase to 10 million barrels a day by 2050, with imports accounting for over 90% of India’s usage. Therefore, the price at which India imports will be crucial. A way to secure that access is to invest in overseas oil and gas assets in regions such as South America, the U.S., and Australia. Now is the time to make these investments, when the price of oil is low and assets are relatively cheap. India’s outbound oil investments, such as those in Russia, have almost come to a halt. Providing an opportunity to actively seek investments in producing oil fields worldwide. These investments should be in the form of minority financial stakes – which reduce the risk of high oil prices without involving India in the complexities of managing an oil field in another jurisdiction. The U.S., with hundreds of operating oil companies, may be a good place to start.
The past decade has seen significant strides in renewable energy, but it is still a long way from being the primary energy source for India and the world.
Amit Bhandari is Senior Fellow for Energy, Investment and Connectivity.
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References:
[i] Maruti e Vitara production target slashed by 69 percent due to rare earth shortage, Autocar India, June 11, 2025. https://www.autocarindia.com/car-news/maruti-e-vitara-production-target-slashed-by-69-percent-due-to-rare-earth-shortage-435674
[ii] Bajaj, TVS, Ather To Cut Short Production Owing To Rare Earth Magnet Crisis, ACKO Drive, July 7, 2025. https://ackodrive.com/news/bajaj-tvs-ather-to-cut-short-production-owing-to-rare-earth-magnet-crisis/
[iii] Eurostat, Decrease in Industrial Production in 2024, news release, July 24, 2025. https://ec.europa.eu/eurostat/web/products-eurostat-news/w/ddn-20250724-1
[iv] European Trade Union Confederation (ETUC), “EU Loses Almost a Million Manufacturing Jobs in Just 4 Years,” press release, May 12, 2025. https://www.etuc.org/en/pressrelease/eu-loses-almost-million-manufacturing-jobs-just-4-years