Emerging countries in the geoeconomics of oil

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here’s much uncertainty about the future of oil and its role in global geoeconomic and geopolitical spheres, but the share of demand from emerging countries will grow strongly, due to demographic dynamics that set them apart from industrial countries and China, as well as their very low current level of consumption, and greater potential for economic growth.

The International Energy Agency recently released its “World Energy Outlook” for 2025, which returns to a Current Policies Scenario, based on the assumption that governments will not introduce new measures to address the climate emergency—an assumption that had been abandoned in recent years. Along with this scenario, the agency also published an updated Stated Policies Scenario, based on the assumption that governments will implement all new policies they have announced but not yet finalized. In both scenarios, demand for oil rises in emerging countries and falls in industrial ones; in the Current Policies Scenario, demand is higher than in the Stated Policies Scenario, but the gap between emerging and industrial countries remains clear. 

 

 

The new geography of demand

Looking at the results of the two oil demand scenarios for major regions or countries. European demand halves by 2050 compared to current levels even in the Current Policies Scenario, and drops even further in the Stated Policies Scenario. Today, European oil demand constitutes 12 percent of the global market, while in 2050 it is forecast to account for only 5 percent in both scenarios. At the other end, India’s demand doubles by 2050 in the Current Policies Scenario to 10 percent of global demand; and increases by two-thirds in the Stated Policies Scenario, still reaching more than 9 percent of global demand.

Demand also declines in North America, but to a much lesser extent, and by 2050 continues to make up between 18 and 20 percent of global demand. And it also decreases in China, which by 2050 it continues to account for 12-13 percent of global demand. North America and China will retain a major influence on the world oil market—though North American countries remain net exporters, while China stays the world’s largest oil importer. Europe is, for better or worse, marginalized; for better, because reduced consumption will mean less exposure with respect to oil market volatility; and for worse, because its influence on the oil market will shrink to almost nothing.

Regarding the changes expected in the Current Policies Scenario by region/country and by sector of use. The graph shows that in four of the regions or countries considered (Europe, China, Japan + South Korea, and North America) demand is expected to decrease, while in the remaining five regions it is expected to increase. In Europe, demand is expected to fall in all areas of use; while in China, Japan and South Korea, and North America, the petrochemical industry is expected to absorb greater volumes of oil. In North America, freight transport is also expected to contribute to a rise in oil demand, while in the rest of the world demand is increasing across almost all sectors, with the exception of power generation (mostly in the Middle East and North Africa) and the residential and commercial sectors, where oil is used for space heating.

The result reflects the extraordinary progress China is making in the electrification of both passenger cars and heavy road transport. In 2024, 11 million electric cars (including rechargeable hybrid vehicles, but not non-rechargeable hybrid vehicles) were sold in China, accounting for two-thirds of all electric cars sold worldwide. With sales of electric cars already accounting for more than half of domestic sales, Chinese manufacturers have already begun an offensive to export their cars to the rest of the world, and mainly to emerging countries, which do not have a major local auto industry to defend, and do not share the protectionist attitude of Europe and the United States.

Another noteworthy variation is the huge increase in oil demand for the petrochemical industry in China and, to a lesser extent, North America; while in Europe demand has fallen—albeit only slightly. Behind this lies an obvious loss of ground—at least in relative terms, but in all likelihood also absolute terms—for the European petrochemical industry, a trend that has continued for many years and now appears irreversible.

 

 

Production: the dominance of the Gulf countries

Analysing the results of the two scenarios in terms of oil production, by region of origin. The main difference between the two scenarios is that, in the first, oil production continues to grow until 2050, reaching 113 million barrels per day in that year; while in the States Policies Scenario, production peaks in 2035 at 100 million barrels per day, and then declines to 97 million in 2050, just below the level recorded in 2024.

What stands out is the potential increase of the role of OPEC+ (i.e., OPEC plus allied countries: Russia, Kazakhstan and others) whose production would rise from 50 mb/d today to 62 mb/d in the Current Policies Scenario, while remaining essentially unchanged in the States Policies Scenario. The increase would be concentrated among Middle Eastern producers, whose production would rise from 30 mb/d to 44 mb/d in the first scenario, and to 37 in the second. Specifically, the largest increases in production would go to Saudi Arabia and the United Arab Emirates, which would strengthen their control over the balance between global oil supply and demand—and with it their ability to influence prices.

Less significant increases in production would be recorded in South American countries (mainly Guyana, Brazil, and Argentina); and in North American countries, but only temporarily, because after the mid-2030s production would decline, particularly in the United States.

 

The new strategic triangle: Gulf-China-India

What emerges clearly is the prominent role that relations between the Gulf Arab countries on the one hand, and China and India on the other, will play in shaping the future of oil. For many years now, the Gulf countries have pursued policies aimed at consolidating their interdependence with the two Asian giants, multiplying industrial collaborations especially in refining and petrochemicals, though not limited to these sectors.

 

This growing Asian interdependence could help to stabilize prices. I do not believe the market will shift away from its current benchmarks in London (Brent) and New York (WTI)—the two closely interconnected reference markets—because on both the Gulf side and the side of China and India, state-owned companies play a dominant role, and trading would not be entirely free. However, it is precisely the closer government control over oil trade on all sides that could enable arrangements that would dampen price volatility, and severely limit the use of futures and other financial derivatives in trading.

On the other hand, the United States is likely to remain the key security partner for the Gulf countries, while economically it is a competitor in oil exports and, more generally, seems determined to regain global industrial market share lost to China and India. This divergence of interests is not new and is grounded in long-standing and complex relationships—particularly between Saudi Arabia and the US. The growing politicization of international trade could adversely affect the Gulf countries in the event of a crisis between China and the United States, or between India and China. There are, of course, many points of friction between these three countries that could lead to—limited—armed conflict.

But scenarios developed on paper under assumptions of international stability are one thing; while real-world developments—heavily influenced by instability and conflict—are quite another. It is not certain that the role of the Gulf producers will expand as much as forecast in the agency’s scenarios, and Russia’s role could diminish further. But the evolution of demand is probably more realistic, with two key results: India’s increasing weight and Europe’s declining share. 
 

Although its relative weight will decrease, Europe will remain an important player

We can imagine that, by 2050, relations with Russia may gradually be restored, although the legacy of the war in Ukraine will continue to weigh heavily for years to come. Africa looks set to transition from net exporter to net importer, but European oil companies will continue to play an important role there—as well as in South America—thus supporting Europe’s diversification of imports.