As market watchers closely track signs of reduced demand in response to the unprecedented loss of Middle East oil and LNG supplies, energy efficiency deserves careful attention. Efficiency improvements are most often thought of for their longer-dated savings on demand, courtesy of systems-wide technology improvements and policy drivers that take time to bear results. But some efficiency gains can be quite sudden in nature — such as moving from an internal combustion engine to an electric vehicle (EV) — as consumers shift purchases to readily available alternatives. While these switches happen on a micro level, in aggregate, they can serve as an undersung tool in reducing energy demand in response to times of short supplies. And with lower-carbon options increasingly cost-competitive with fossil-based incumbents, they present a more formidable challenge to future oil and gas demand coming out of the current supply shock than in past cycles. Energy efficiency has long been a core component of lower-carbon energy use forecasts, even where gains are slow to materialize. Since the early 1980s, the global economy has persistently consumed less and less energy per unit of GDP. While rising living standards increase energy consumption and temporarily slow efficiency gains, technology advancements tend to reassert the push toward efficiency over time. In 2025, producing one dollar of global GDP involved 2.9 megajoules of primary energy, down almost 50% from 5.4 MJ per dollar in 1980, or minus 1.3% per year. Energy efficiency accelerated in the 2010s to minus 1.9% per year, reflecting technology-level gains — in buildings, motors, appliances and vehicles — together with a shift in the composition of GDP toward less energy-intensive sectors. The economic rebound following the Covid-19 pandemic of 2020 saw efficiency gains slide back toward their longer-term average as heavy, energy-intensive industries such as steelmaking, cement and chemicals led the way and rising living standards in the Global South pushed up air conditioning demand by over 4% per year, according to the International Energy Agency (IEA).
