Forecasts from IEA leading to debates with OPEC and U.S. lawmakers over the future of oil demand
The Paris-based International Energy Agency (IEA), often termed the Mecca of the energy world, is sticking to its guns.
Global oil markets are headed toward a major glut this decade, the IEA blasted last Wednesday. Global oil demand will peak by 2029 and then begin to contract the following year while the U.S. and other non-OPEC countries add to supply, it projected.
The IEA added that global oil demand growth will plateau at 105.6 million barrels per day (bpd) before beginning to contract in 2030. The growing use of electric cars, efficiency improvements, and the move away from oil in power generation is rapidly transitioning the global energy portfolio.
The IEA also sees overall global supply capacity hitting nearly 114 million bpd by 2030, or eight million bpd above the projected demand of 105.6 million bpd. Non-OPEC producers, led by the U.S., will make up three-quarters of the capacity increase.
In its medium-term oil market report, the IEA said that the global spare capacity – the amount of pumping capacity left unused because of adequate supply – could surge in coming years to levels only seen during the Covid-19 pandemic, a WSJ commentary added. “This report’s projections, based on the latest data, show a major supply surplus emerging this decade.”
“Spare capacity at such levels could have significant consequences for oil markets – including for producer economies in OPEC and beyond, as well as for the U.S. shale industry.”
The recent IEA report also underlines a widening gap between the positions of the IEA and the Organization of Petroleum Exporting Countries (OPEC).
While last week’s IEA report trimmed global oil demand growth forecast for 2024 by 100,000 bpd to 960,000 bpd, citing sluggish consumption in developed countries, the OPEC slammed the IEA for ‘dangerous’ forecast of peak oil demand by 2030. Peak oil demand is not on the horizon, OPEC Secretary General Haitham Al Ghais insisted a day after the IEA projections. “It is simply a continuation of the IEA’s anti-oil narrative. Given the real trends we see today, we do not see peak oil demand by the end of the decade,” OPEC’s secretary general emphasized in a column published Thursday.
Some net-zero scenarios suggest that oil should not be part of a sustainable energy future, Al Ghais wrote in his column. “This narrative was repeated only yesterday when the IEA published its Oil 2024 report in which it once again stated that oil demand would peak before 2030,” he said.
“It will only lead to energy volatility on a potentially unprecedented scale,” Al-Ghais was quoted as saying in oilprice.com. “The IEA suggested that gasoline demand had peaked in 2019, but gasoline consumption hit record levels in 2023 and indeed continues to rise this year,” he argued.
On the issue of the changing global energy mix – the rapid emergence of alternatives and the approaching peak oil – it is interesting to note that the IEA is clashing not only with OPEC but also with leading U.S. lawmakers.
The IEA’s role is under focus at Capitol Hill. In a letter dated March 20, senior U.S. Republican lawmakers have attacked the IEA, accusing it of becoming an energy transition cheerleader.
“We would argue that in recent years, the IEA has been undermining energy security by discouraging sufficient investment in energy supplies – specifically, oil, natural gas, and coal,” the letter addressed to Fatih Birol, the executive director of the IEA, said.
“It should disturb you that biased parties are exploiting the IEA’s forecasts and other products to advocate for policies that undermine energy security,” the letter addressed to IEA said.
In response to the letter, the IEA then insisted that it was committed to a secure, affordable, and sustainable energy future for all.
The projections reiterated last Wednesday could rekindle the debate. Yet the IEA seems convinced and is determined to push ahead.
If the IEA is to be believed, the oil industry could well be on the verge of its last hurrah. And to be fair, the IEA and its projections could not be taken lightly. It carries weight.
We are left with only one option: we are indeed transitioning into a significant shift in how energy is produced, consumed, and managed.
Toronto-based Rashid Husain Syed is a highly regarded analyst specializing in energy and politics, with a particular emphasis on the Middle East. In addition to his contributions to local and international newspapers, Rashid frequently lends his expertise as a speaker at global conferences. Organizations such as the Department of Energy in Washington and the International Energy Agency in Paris have sought his insights on global energy matters.
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