It’s Sinking In That Fossil Fuel Demand Won’t Grow Forever

Climate activists, oil executives, atmospheric scientists, and investors are all trying to make sense of the same picture using completely different language and with vastly different priorities. And this week was a particularly striking example of this split screen. 

Policymakers and climate advocates gathered at a global summit to phase out fossil fuels. Meanwhile oil and gas producers are trying to maximize their returns in this quickly evolving world. The two groups seemingly have little overlap. But both climate advocates and sophisticated oil producers are now operating from the shared premise that unbounded fossil fuel demand growth will not continue forever. 

We see the shift happening in the electricity sector already. For oil, it’s slower-moving and obscured by geopolitics. But the question remains: how do you respond to a market that may be smaller or flatter and certainly will be less predictable? To answer these questions, we didn’t see bold proclamations from climate advocates or oil producers this week. But, in 2026, the most telling moves are often made without fanfare.  

This week’s summit, held in the coastal city of Santa Marta, Colombia, was the culmination of years of planning with representatives of nearly 60 countries gathered for talks on how to phase out fossil fuels. The talks were deliberately held separate from the official United Nations climate negotiation process, and the outcome was that countries launched “work streams” to figure out the concrete policy measures required to accelerate the transition, including infusing climate into trade policy and reworked financial systems. 

Amid soaring energy prices, these might sound like almost fantastical policy proposals, but they actually point to a shifting reality on the ground. A report from energy think tank Ember released alongside the summit showed a “sustained and structural decline” has begun in fossil fuel power generation in OECD members (a group of 38 wealthy countries). The report also highlighted last year’s small—but nonetheless noteworthy—decline in fossil-fuel powered electricity generation in India and China. 

However real that shift may be, the biggest producers and consumers aren’t keen to talk about it in those terms. Indeed, the most crucial players were missing in Colombia. The world’s largest economies and emitters weren’t there, including the U.S., India, and China. Nor were major oil and gas producing nations like Russia and Saudi Arabia.   

Nonetheless, the absent countries are grappling with the same set of facts. It’s worth viewing the United Arab Emirates’s decision to leave OPEC through this lens. OPEC has long shaped the global price for crude oil by requiring a collective sacrifice from its members: produce less to raise prices. This approach is designed to manage members’ long- and short-term interests. It doesn’t work as well, however, when you think the current level of demand for oil might be time-bound. Slowing your production for the collective good is, in effect, leaving money on the table. 

The decision “reflects the U.A.E.'s long-term strategic and economic vision and evolving energy profile, including accelerated investment in domestic energy production,” the U.A.E. energy ministry said in a statement. 

OPEC models have suggested that demand will continue to grow for decades to come, but they don’t necessarily represent the consensus view among economists who study these things closely. While no serious analyst would suggest that oil demand is going away anytime soon, many have modeled demand flatlining followed by a decline. The International Energy Agency’s scenario last year assessing what would happen under “stated policies” showed oil demand remaining essentially flat over the next decade. 

The prospect of a flatlining business—even if it plays out over decades—will shock any industry. Price volatility is one obvious result as OPEC’s ability to set prices diminishes. And it will lead to complicated calculations of which assets to develop and where. No one wants to leave money on the table, but big risks can also lead to outsized losses.

As things continue to evolve in this topsy-turvy moment, evaluating the revealed preferences of big oil producers, in terms of actual capital allocation and strategic decision making, is more of a signal of where things are going than simply looking at national targets or even earnings calls.   

At the end of its official statement, the U.A.E. energy ministry took a detour to reaffirm that it will “continue investing across the energy value chain” including “low-carbon solutions.” The U.A.E. wasn’t in Santa Marta, but perhaps they didn’t need to be. 

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