The International Energy Agency is the gold standard on energy statistics. But can the IEA interpret its own data?
Fatih Birol, Executive director of the International Energy Agency. Photo from The Council on Foreign Relations.
The International Energy Agency (IEA) has long collected and interpreted energy-related statistics.
In recent years, the IEA has also taken to painting three-part “scenarios” of possibilities. These tend to look like this: If current government energy policies continue, then the outcome will be X; if governments keep all their climate promises, then Y would happen; if net-zero energy production comes about, then the result would be Z.
The problem is many observers take X, Y and Z to be simple factual predictions. They are not.
If you oppose fossil fuels, for example, you select the X, Y or Z that best fits your position and announce that it is an outlook (or simply a fact) determined by the IEA.
And so, you read from such groups that “peak oil” — the point at which world oil consumption will cease to grow — will occur in only a few years, and perhaps even as early as next year.
Let’s dive into those claims and the interpretations of much of the media.
The IEA’s outlook
The IEA calls itself “the most authoritative global source of energy analysis and projections,” and on October 24, 2023, issued its latest World Energy Outlook report. Among other things, it sees that world demand for coal, oil and natural gas could peak before 2030.
"The transition to clean energy is happening worldwide and it's unstoppable,” said Fatih Birol, IEA executive director. “It's not a question of 'if,' it's just a matter of 'how soon' – and the sooner the better for all of us."
The IEA report sees a radical rise in clean-energy technologies, including solar, wind, electric vehicles and heat pumps.
That includes almost ten times as many electric cars as there are now worldwide; solar generating more electricity than the entire current US power system; renewables’ meeting 50% of global electricity needs (up from today’s 30%); heat pumps outselling fossil fuel boilers around the world; and new offshore wind project investment outpacing coal-and-gas-fired power plant investment three-to-one.
“All of those increases are based only on the current policy settings of governments around the world. If countries deliver on their national energy and climate pledges on time and in full, clean energy progress would move even faster. However, even stronger measures would still be needed to keep alive the goal of limiting global warming to 1.5 °C.”
Birol insisted that “governments, companies and investors need to get behind clean energy transitions rather than hindering them.” And the IEA report led Canada’s minister of energy and natural resources, Jonathan Wilkinson, to say in an interview: "What Canada [or Canadians?] needs to do is to really get with the program.”
For the record, we (and no doubt most Canadians) wish that the world will somehow achieve the goal of limiting global warming. But what should we make of the IEA’s proposition that the world could hit “peak oil” before 2030?
Crying wolf?
Energy observer Cyril Widdershoven writes, “The current IEA report appears to resemble a modern-day version of ‘Crying Wolf.’ . . . Such a scenario appears unlikely.”
He points out that the IEA sees an impaired Chinese economy as hastening peak demand for fossil fuels. “The IEA projects that China's GDP growth will average just under 4% per year until 2030. However, these projections are unsubstantiated. . . . Furthermore, the expectations of reduced pollution and emissions in China contrast with the substantial investments in coal, natural gas and crude oil within and outside the country.”
Then, there are oil consumption forecasts from the Organization of the Petroleum-Exporting Countries (OPEC) – that powerful alliance led by the likes of Saudia Arabia and Venezuela – that differ sharply from the IEA proposition.
In its 2023 World Oil Outlook, OPEC expected world demand to reach 116 million barrels per day by 2045, roughly 6 million more barrels per day than it predicted this time last year. OPEC's latest report also differs from the IEA on China: “In 2024, solid global economic growth, amid continued improvements in China, is expected to further boost oil consumption.”
Call us skeptical, but when it comes to disagreements like these, we find those with the most to lose (or gain) undertake the most thorough study.
The Independent Petroleum Association of America (IPAA) quotes Chevron CEO Mike Wirth as also disputing IEA’s projections: “I don’t think they’re remotely right . . . You can build scenarios, but we live in the real world, and have to allocate capital to meet real-world demands.”
The association argues: “This contradiction between scenarios and reality is most pronounced in the report’s claims about liquified natural gas (LNG). While claiming that demand for natural gas will peak within the next seven years, IEA simultaneously forecasts major growth in new LNG projects and capacity set to come online over the next decade.”
There are, then, those who view the IEA’s outlooks as palm-reading disguised as science.
Case in point, Alberta Premier Danielle Smith says the IEA is simply “no longer credible.” Smith says it no longer does analysis but points to outcomes it wants and outlines paths to get there. She says she prefers to get her information from private-sector analysts with chips on the table.
Those with long memories may also recall the assorted “experts” in the distant past who predicted that peak oil would occur in the early 1950s — some 70 years ago.
Make of the IEA report what you will. We're with commentator Javier Blas of Bloomberg News, who writes:
“This may sound paradoxical, but the International Energy Agency is both the gold standard in global supply-and-demand energy statistics and a poor forecaster of the same data. The sum of all that’s good and bad is its annual flagship report, the World Energy Outlook — thus, take it both seriously and with skepticism.”
Governments in Canada shouldn’t make climate and resource policies under the assumption that the IEA’s assessment is entirely accurate. It should look at the opportunities seen by energy investors around the world and ask itself if it can help Canadians prosper, too, while the demand for oil and gas last.
Hint: it’ll be here for a while.