The world could soon see a massive oil glut. Here’s why.

The world could have a glut of oil by the end of the decade because of rising production combined with declining demand as consumers and businesses switch to electric vehicles and renewable energy, according to a new report from the International Energy Agency.

The International Energy Agency said Wednesday that the world’s total oil supply capacity is expected to rise to about 114 million barrels a day by 2030, which the group said would amount to “staggering” 8 million barrels a day beyond projected demand. 

That type of spare capacity hasn’t been seen outside the COVID-19 lockdowns of 2020, when economies across the world shut down as governments sought to stop the spread of the deadly virus, the IEA said. The extra capacity could have “significant consequences for oil markets,” ranging from the U.S. to OPEC member nations such as Saudi Arabia and Kuwait, it added.

“This report’s projections, based on the latest data, show a major supply surplus emerging this decade, suggesting that oil companies may want to make sure their business strategies and plans are prepared for the changes taking place,” said IEA Executive Director Fatih Birol in a statement. 

Among the drivers for rising oil supplies are expectations that Americans and consumers in other developed nations will continue to shift to electric vehicles. Global sales of EVs could reach 40 million cars in 2030, with almost one in two new cars projected to be an EV at that time, the IEA forecasted.

Could gas prices decline?

It’s possible that an oversupply of oil could lead to a “lower price environment,” according to the IEA report. However, the analysis includes three projections for where oil prices could be in 2030, ranging from a high of more than $90 a barrel to a low of less than $60 a barrel within six years. Currently, oil is trading at about $82 a barrel. 

Still, one expert cautioned against reading too much into the report.

“It’s a long-range outlook, so it could be way off, or very close, but I’m a bit more concerned with the slowdown in EV adoption and the tremendous costs for countries adopting EVs,” Patrick De Haan, head of petroleum analysis at GasBuddy, told CBS MoneyWatch in an email. 

Cheaper gas prices might not materialize by 2030 because some refineries have shut down in the U.S. and Europe, and there are fewer plans to build new facilities given the shift into solar, wind and other renewable energy sources, he added. 

“[T]he future is hazy when it comes to this potential impact to gasoline prices,” De Haan said. “We’ll still need refineries for some time, and if they shut down as the transition occurs, that could lead gas prices higher in the long run.”

In the short term, drivers are getting some near-term relief, as gas prices are now dropping across the nation due to weaker demand and lower oil prices. The average price for regular unleaded gas in the U.S. was $3.44 per gallon on Monday, down about 9 cents from a week ago and 14 cents from a year earlier, according to AAA.