Supply shocks driven by war in the Middle East and in Ukraine are hastening the decline of fossil fuels in the global energy mix, according to DNV’s Energy Transition Outlook 2026, which notes that energy security concerns are prompting traditional oil and gas importers to pivot more quickly toward domestically available renewable energy sources.
DNV’s energy transition market forecast through 2060 concluded that near-term concern over energy security is both accelerating the long-term pivot away from oil and gas and causing permanent demand destruction.
“I think that the key theme over the next decade is going to be energy security,” Jason Bedford, visiting senior research fellow, East Asian Institute, National University of Singapore, said during the outlook’s launch event in Singapore in October.
“Every major economy from Japan, Korea, China … everyone is seeking to diversify their sources, including where it is not necessarily cost efficient to do so,” Beford noted. “I don’t see that changing. I think this is a deep structural change in the global energy system.”
Gas Demand Remains Buoyant
In its outlook, DNV forecast that fossil fuels will retain a 51% share of global primary energy supply in 2050. Demand for oil is forecast to decline slowly after peaking in 2028. In contrast, demand for natural gas will remain more buoyant because of the higher cost of alternatives such as hydrogen.
The report notes that “subsurface expertise remains essential, and the long-term runway for gas production remains wide open.”
As for meeting net-zero targets by 2050, DNV notes that energy- and industrial process-related carbon emissions will decline by only 44% by midcentury, falling from 39 gigatons (Gt) today to 22 Gt in 2050, not even halfway to the net-zero pledge envisioned by the Paris climate agreement.
Power generation is expected to lead the way with a 60% reduction in CO2 emissions, followed by manufacturing at 45% and transport at 34%, with buildings and industrial processes lagging behind. According to the outlook, the slower pace doubles the time expected to achieve net-zero to 2098 and results in a 2.3°C rise temperature increase by 2100.
Exporters, Importers Follow Different Paths
DNV said global spending on non-fossil energy sources, including renewables and nuclear power, nearly doubled to $1.77 trillion in 2026 from $860 billion in 2021 as major fossil fuel importers such as China, India, and Europe increased the share of non-fossil fuels in their primary energy mix by 2.2 percentage points.
In contrast, fossil fuel exporters such as Russia and countries in the Middle East and North America increased the share of clean energy in their energy mix by only 0.7 percentage points, DNV said.
As oil demand declines, Middle East producers are projected to supply 40% of the world’s oil in 2050, down from the 50% market share projected in DNV’s 2025 Energy Transition Outlook.
Modeling a scenario in which the Middle East conflict continues and oil and gas prices remain elevated through 2030, DNV found “a short-term reduction in demand of 4–6% while the conflict lasts,” along with “a permanent destruction of global oil and gas demand of 2–5% relative to our main forecast through the remainder of our forecast period.”
Electricity’s Role in Powering AI
By 2060, DNV projects global data center and AI electricity demand to reach 5,700 TWh, an increase of 14 times that of current levels. In 30 years, data centers will consume 6.8% of the world’s electricity, compared to 1.2% today, according to the forecast.
Including electricity demand for transportation, such as electric vehicles, and heating increases total power demand from approximately 33,000 TWh to 84,000 TWh by 2060, a 155% rise that DNV forecasts will be met primarily by solar (46%) and wind (31%).
DNV’s model sees a role for natural gas “as a critical transition bridge” to help balance the grid when solar and wind fall short, while nuclear power provides grid stability. It views nuclear as essential in maintaining energy security and predicts global nuclear capacity will grow 30% over the next 10 years and 170% by 2060.
Countries driving electrification tend to be fossil fuel importers exposed to ongoing supply shocks. Electricity demand in Europe, China, and India is projected to increase by an average of 62% over the next 2 decades. In contrast, oil and gas exporters in North America, the Middle East, and Russia are forecast to increase electricity capacity by an average of 47% over the same period.
China is expected to set the pace for electrification, with electricity accounting for 27% of final energy demand today and more than 50% by 2060, DNV said.
China also manufactures more than 80% of the world’s solar modules and 95% of solar wafers, according to International Energy Agency used in the model.