The International Energy Agency, which has repeatedly predicted that global oil demand growth will peak before 2030, has drafted a report admitting that both oil and gas demand are set to continue growing for decades.
Bloomberg’s Javier Blas reported the news in a column this week, citing a draft of the IEA report, World Energy Outlook. The agency uses a set of scenarios for the future, including some major assumptions, such as that all currently discussed climate-related policies would come into effect in full. Until 2020, the IEA included a Current Policy Scenario, which, as the name suggests, reflected actual policies being implemented.
Blas says that this scenario “Historically undercounted solar and wind power.” Under pressure from European governments and climate activists, the IEA discontinued the Current Policy Scenario and replaced it with a Stated Policies Scenario, commonly referred to as STEPS and regularly reported as the default scenario of the IEA’s forecasts, even though it includes policies and measures that have yet to be implemented and may never be implemented.
Not only that, but Blas noted that the IEA then introduced another scenario that was favorable to transition technology but distant from factual reality. The Announced Pledges Scenario “assumed that all the energy and climate policies, plus political aspirations, were met in full and on time.”
This may go a rather long way towards explaining why the International Energy Agency has had to revise its oil demand projections time and again, and why it suffered an embarrassing U-turn in 2021 when it released its Road Map to Net Zero. In it, the IEA assumed no new oil and gas exploration would be necessary beyond that year – only to call for more exploration several months later as oil supply tightened and prices rose.
The implications of the scenario revelation are significant. It was under the IEA’s assumption-heavy scenarios that other forecasters took up the narrative that billions and even trillions worth of oil and gas reserves could end up stranded because of weakening demand. Now, this narrative may have to change.
By Irina Slav for Oilprice.com