The primary driver behind this recalibration is the prevailing geopolitical instability that has compelled nations to prioritize immediate energy supply reliability over an accelerated transition to cleaner alternatives. Conflicts, trade disputes, and the fragmentation of global alliances have created an environment where securing diverse and stable energy sources, often including traditional fossil fuels, has become a paramount national security objective. This strategic shift has seen some countries either slow their climate commitments or actively increase domestic hydrocarbon production to bolster energy independence, as evidenced by past policy pronouncements from major economies. The inherent volatility of the global energy market, exacerbated by supply chain disruptions and regional conflicts, has reinforced the perception that fossil fuels, despite their environmental cost, offer a degree of immediate resilience that emerging green technologies cannot yet fully provide.
Beyond geopolitics, the inherent difficulties in decarbonizing certain industrial and transport sectors are proving to be a formidable barrier to an earlier peak in fossil fuel demand. While electrification in road transport is gaining considerable momentum, displacing an estimated 40% to 60% of oil demand in this segment, progress in hard-to-abate sectors remains sluggish. Aviation, marine shipping, and heavy industries such as steel, cement, and petrochemicals present unique technological and economic challenges. These sectors require extremely high energy densities (for aviation and marine fuels) or high-temperature process heat and feedstock (for heavy industry) that are currently most efficiently and economically met by fossil fuels. Sustainable aviation fuels (SAFs), green hydrogen, and advanced biofuels are promising but remain nascent, expensive, and lacking the scalable infrastructure required for widespread adoption. Without substantial policy intervention, technological breakthroughs, and massive capital investment, these sectors are expected to remain heavily reliant on hydrocarbons for decades, thus sustaining oil and gas demand.
India’s trajectory is particularly illustrative of these global dynamics. As the world’s third-largest consumer and importer of crude oil, India’s energy demand is on an unprecedented upward curve, projected to surpass that of the United States in the 2040s and China in the 2060s. This rapid expansion is fueled by robust economic growth, urbanization, and a burgeoning population, necessitating a continuous surge in energy supply. The nation’s profound import dependence, with almost 90% of its oil requirements met through overseas purchases amounting to $161 billion in FY25, makes energy security a top strategic imperative. This reliance exposes India to global price volatility and supply chain vulnerabilities, prompting a pragmatic approach that balances decarbonization goals with the immediate need for affordable and reliable energy.
Shell’s latest report, "India’s energy transition in a security-focused age," highlights specific demand projections within India. Petrol demand is anticipated to peak between 2035 and 2040, while diesel demand, primarily driven by the heavy trucking and logistics sectors, is expected to persist longer, peaking between 2040 and 2045. This extended timeline for diesel reflects the significant hurdles in electrifying or transitioning heavy-duty transport, where battery range, charging infrastructure, and payload considerations remain substantial obstacles. Furthermore, India’s refining capacity is set to expand from 258.1 million tonnes per annum (mtpa) to 309.5 mtpa by 2030, a clear indication of anticipated sustained demand for petroleum products.
The story for coal, another critical fossil fuel, mirrors that of oil. Predominantly used in power generation and steel manufacturing, coal demand in India is also expected to peak well beyond earlier estimates, likely after 2040, potentially extending towards 2050. Despite ambitious non-fossil fuel targets, India plans to augment its coal-based power generation capacity by an additional 97 GW in the coming years. This seemingly contradictory strategy underscores the nation’s dual challenge: meeting surging electricity demand for development while simultaneously attempting to green its energy mix. Mansi Tripathy, Country Chair of Shell India, emphasized that "security being a very primary factor," coal demand stability will likely extend well into the 2040s, with a decline only commencing post-2050.
These revised projections from Shell diverge from earlier, more optimistic assessments by entities like the International Energy Agency (IEA), which had previously forecast a global peak oil demand by 2030 and an Indian peak in the mid-to-late 2030s. The difference highlights the distinct methodologies and assumptions underlying these outlooks. While some scenarios prioritize rapid policy-driven decarbonization, Shell’s ‘Archipelagos’ and ‘Surge’ scenarios, reflecting current geopolitical and economic pressures, paint a more gradual and complex transition. Globally, oil demand continues its upward trend; the IEA itself, in its February outlook, projected an increase of 850,000 barrels per day in 2026, building on a current global demand of approximately 105 million barrels per day. This global growth further complicates efforts to accelerate peak oil.
Despite the persistent reliance on fossil fuels, India is making significant strides in its renewable energy deployment. As of December 31, total installed generation capacity reached 513.73 GW, with non-fossil fuel sources contributing a substantial 266.78 GW, or 51.93%. This impressive growth in green power signifies a strategic pivot towards domestic, renewables-based energy, which enhances energy independence and security while supporting decarbonization. However, Shell’s analysis points to a crucial paradox: while the share of fossil fuels in India’s overall energy basket may decline during the energy transition, the absolute volume of fossil fuels consumed is projected to continue increasing under current scenarios. This reflects the immense scale of India’s overall energy demand growth, where even a growing renewable sector cannot fully offset the rising demand for traditional fuels in the near to medium term.
Shell’s ‘Archipelagos’, ‘Surge’, and ‘Horizon’ scenarios provide a robust framework for understanding these complex interactions. The ‘Archipelagos’ scenario envisions a world increasingly fragmented by geopolitical and economic tensions, fostering new regional alignments. In this context, India, with its robust manufacturing capabilities, youthful workforce, and dynamic economy, finds new opportunities but navigates a more segmented and less coordinated global energy transition. The ‘Surge’ scenario, conversely, is driven by the transformative power of artificial intelligence and digitalization, boosting productivity globally. India in this scenario adopts a measured approach to technological integration, prioritizing skill development and infrastructure building to mitigate rapid job displacement. The ‘Horizon’ scenario represents a more aspirational, normative pathway, aligning with the Paris Agreement’s goal of achieving global net-zero emissions by 2050 and India’s target by 2070. This ideal scenario necessitates unprecedented policy coordination, rapid technological innovation, and significant societal shifts.
Crucially, all Shell scenarios, even the most optimistic ‘Horizon’ pathway, underscore the indispensable role of carbon removal technologies. Achieving deep decarbonization, particularly in the face of persistent hard-to-abate emissions, will necessitate substantial capacities for carbon capture, utilization, and storage (CCUS) and nature-based solutions. Geological storage and natural sinks will become essential tools to manage residual emissions, highlighting the sheer scale of the challenge in meeting global climate targets.
The economic implications for India of this prolonged fossil fuel dependence are significant. While domestic renewable energy expansion reduces vulnerability to import shocks, the continued reliance on imported crude translates into substantial foreign exchange outflows and exposure to volatile international energy markets. Investing in green technologies and infrastructure, while capital-intensive upfront, promises long-term energy security, cleaner air, and new economic opportunities. Policy efforts must therefore focus on accelerating the development and deployment of solutions for hard-to-abate sectors, fostering international collaboration for technology transfer, and implementing robust carbon pricing mechanisms to incentivize cleaner alternatives.
In conclusion, the journey towards a decarbonized global energy system is proving to be far more intricate and protracted than initially anticipated. Geopolitical currents, coupled with the stubborn challenges of industrial transformation, have pushed back peak fossil fuel consumption timelines, notably for India and globally into the 2040s. India’s unique position as a rapidly growing economy, balancing developmental imperatives with climate ambitions, serves as a microcosm of this global complexity. The path ahead demands a pragmatic, multi-faceted strategy that acknowledges immediate energy security needs while resolutely pursuing long-term climate resilience through sustained investment in renewables and groundbreaking decarbonization technologies. The revised forecasts serve as a potent reminder that the energy transition is not a linear sprint but a complex, adaptive marathon.
