The International Energy Agency (IEA) released its 2024 World Energy Outlook (WEO) on Tuesday, and its predictions are continuing to create confusion in global energy markets. Specifically, the report deviates from other leading forecasters by predicting that demand for oil and natural gas will peak within five years.
In the past year, OPEC, Envernus, JP Morgan, Wood Mackenzie, and Goldman Sachs have predicted that demand for oil and natural gas will continue to grow beyond 2030. So what’s going on here? Why is the IEA seemingly out of touch with financial institutions and other agencies? Let’s dive in.
World Energy Outlook Isn’t *Technically* A Forecast
While one wouldn’t be able to know this from the report’s presentation and the media headlines, the WEO isn’t technically a forecast. Rather, it predicts energy demand under three scenarios: Stated Policies (STEPS), Announced Pledges (APS), and Net Zero (NZE). Thus, it’s not assessing actual demand for oil and gas. The report discloses this on page 67:
“This Outlook examines three main long-term scenarios – none of which are forecasts – to provide a framework for understanding possible energy futures. Policies are the critical differentiator between them.” (emphasis added)
Dan Byers, Vice President for Energy Policy at the U.S. Chamber Commerce, took issue with the fact that the report calls itself an Energy Outlook but doesn’t mention this more clearly:
“Lots of people digging into the @IEA WEO today. IMO the most important thing to know about it is buried on page 67: it is NOT a forecast of what they think will happen.”
Energy Observer Abdul Aziz Al-Muqbel noted that when the IEA performed a real forecast on renewable energy growth just weeks earlier, it arrived at starkly different results:
“The IEA !!! 2 reports in one week each report is stating a different number! IEA’s WEO 2024 ‘fossil fuel 75% by 2030’ IEA’s Renewables report last week says fossil fuels will be 80% of global energy in 2030. Are you kidding me???”
All of this begs the question: why isn’t the IEA publishing actual forecasts in its World Energy Outlook?
IEA Chose Politics Over Practicality
The IEA decided to stop producing projections based on real-world demand in 2019 in response to political pressure from climate activists. It decided to replace its Current Policies Scenario (CPS) with one that assessed announced climate and energy policy pledges.
Since changing its focus from a neutral energy market watchdog, the IEA’s forecasts have increasingly become outliers. However, officials in the United States are still listening. In fact, the Department of Energy (DOE) decision to pause the buildout of natural gas export terminals in January came after the IEA warned of “oversupply” in the market.
Some have also argued that the IEA’s bullish outlook on a future dominated by renewables has caused it to turn a blind eye to sectors that are demanding exponentially more energy. Richard Meyer, Vice President of Energy Markets at the American Gas Association (AGA), argued that the agency’s most recent report didn’t adequately account for new electricity demands from artificial intelligence (AI) data centers:
“The “faster” case IEA presents would likely be a very low growth scenario. Credible estimates for the U.S. alone show larger electricity demand growth than what’s shown here globally. Look, I don’t know what’s going to happen, but I would bet the over on this one.” (emphasis added)
Bottom line: While the IEA’s WEO has historically been a useful tool to help investors and policymakers forecast future energy markets, it’s not actually a forecast in and of itself – and that includes its outlier claims of peak oil.
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