After deriding the last 3½ years of net-zero scenarios from the International Energy Agency, the Organization for Petroleum Exporting Countries and its allies (OPEC+) have scaled back their projections for future growth in global oil demand.
“Over five consecutive monthly downgrades, the group’s secretariat in Vienna has slashed demand estimates by 27%, with its outlook this week making the biggest cutback so far,” Bloomberg reported in mid-December.
“For the past 18 months, [Alberta Premier] Danielle Smith has been slagging the International Energy Agency (IEA)’s energy modelling and pumping OPEC’s slow energy transition narrative,” Energi Media energy transition specialist Markham Hislop wrote on LinkedIn. “Well, the IEA won, Smith and the Saudis lost. Peak oil demand by 2030 or earlier is looking more likely with every passing day.”
OPEC, and Saudi Arabia in particular, have been displeased with the IEA since its blockbuster Net Zero by 2050 report called for no new investment in oil, gas, or coal development, a massive increase in renewable energy adoption, speedy global phaseouts for new natural gas boilers and internal combustion vehicles, and a sharp focus on short-term action to reduce climate pollution.
“Beyond projects already committed as of 2021, there are no new oil and gas fields approved for development in our pathway, and no new coal mines or mine extensions are required,” the IEA wrote at the time. “The unwavering policy focus on climate change in the net-zero pathway results in a sharp decline in fossil fuel demand, meaning that the focus for oil and gas producers switches entirely to output—and emissions reductions—from the operation of existing assets.”
Over the last 18 months or so, the Paris-based agency has projected that demand for all three fossil fuels will peak this decade before going into permanent decline, heralding the end of any rationale for financiers to invest in new projects that will take many years if not decades to go online, then generate a return.
Until the net-zero report, oil-producing jurisdictions like Saudi Arabia and Alberta were only too happy to quote IEA modelling and analysis, beginning with the annual World Energy Outlook that the agency styles as the “gold standard of energy analysis”.
But that changed almost overnight when the IEA began to more fully factor in the global imperative to reduce emissions and the plummeting cost of renewable energy, energy efficiency, and energy storage. In June, 2021, Saudi Oil Minister Prince Abdulaziz bin Salman dismissed the IEA analysis as “La La Land” and warned investors not to bet against oil.
“I’m going to make sure whoever gambles on this market will be ouching like hell,” he said.
In April 2022, OPEC+ accused the IEA of giving too much credence to the climate emergency and purveying biased data, and declared it would no long rely on the agency’s oil data, Bloomberg reported at the time.
“But now the cartel is gradually conceding defeat,” the news agency wrote in mid-December, with its projection of future demand moving closer to the IEA’s. The news story cited two factors that will raise pressure on the cartel: projections that China’s oil demand may peak this year, a half-decade earlier than expected, and colossal fossil ExxonMobil’s announcement that it will continue increasing production, deepening a global glut that has been driving down oil prices and causing economic headaches for petrostates like Saudi Arabia.
For member countries whose economies large rise or fall on oil revenues, “OPEC’s forecasting blunder is somewhat academic,” Bloomberg writes. “With their decision this month to once again delay the restart of halted output, members showed how little faith they place in the secretariat’s bullish estimates.”
