Mixed Messages: IEA Claims ‘Peak Oil’ While Calling For ‘Continued Investment’
The data keep stacking up against tenuous “peak oil” claims. While the International Energy Agency forecasts that global oil demand will peak within the next decade, it also confirms that fossil fuels are necessary for the “secure operation of the overall energy system for many years to come.”
Ahead of the anticipated update to its World Energy Outlook this month, IEA released the second iteration of its Net Zero Roadmap. Intended to inform upcoming discussion at COP28, the Roadmap calls for “massive and sustained” increases in clean energy investments to accelerate the transition away from fossil fuels, asserting that no new major oil and gas extraction projects are needed.
But as Energy In Depth has previously discussed, headline-grabbing “peak oil” forecasts are a historically murky subject. While the organization’s topline conclusions are likely to be used as political fuel for “Keep It In the Ground” activists, IEA’s recommendations don’t actually support those ends.
“Continued investment is required…”
In line with IEA’s own definition of energy security – “the uninterrupted availability of energy sources at an affordable price” – the Roadmap’s authors confirm that oil and natural gas infrastructure will be crucial for global energy security for years to come:
“…elements of fossil fuel infrastructure continue to contribute to the secure operation of the overall energy system for many years to come…Unplanned or premature retirement of this infrastructure could have negative consequences for energy security.” (emphasis added)
The Roadmap further acknowledges that “continued investment is required in existing oil and gas assets and already approved projects” in order to avoid price spikes. Even IEA Executive Director Fatih Birol, who called peak fossil fuels a “welcome sight,” conceded that peak demand projections “don’t remove the need for investment in oil and gas supply.”
Following the Roadmap’s release, Mike Sommers, president and CEO of the American Petroleum Institute, pointed out the inconsistencies in IEA’s narrative. Specifically, he noted that IEA’s own Oil 2023 Outlook projects significant demand growth through 2028 and last year’s World Energy Outlook showed increased global oil demand to at least 2040.
Allies call for “decades” of natural gas production
IEA makes particularly bold claims about natural gas’s role in the global energy landscape, arguing that Russia’s war in Ukraine will quickly accelerate deployment of renewable energy across continental Europe and cause global natural gas demand to reach peak highs this decade. But Ditte Juul Jørgensen, a top E.U. energy official, recently told the Financial Times that the European Union will rely on U.S. LNG exports for “decades” to come:
‘‘We will need some fossil molecules in the system over the coming couple of decades. And in that context, there will be a need for American energy,’ said Jørgensen, director-general for energy in the European Commission, in an interview in New York.”
According to the Financial Times, Jørgensen’s statement helps “clear the path forward for European buyers who have been hesitant to sign deals with U.S. suppliers past the 2030 timeframe” and serves as a positive signal to U.S. LNG companies. U.S. natural gas exports broke new records in the first six months of 2023, and energy research firm Rystad Energy forecasts that the development of new natural gas fields is needed to meet global demand through at least 2030, even in aggressive emissions reduction scenarios.
The reality is, global demand for natural gas has proved in recent years to be complex and unpredictable. In an analysis of the role of oil and natural gas in reducing emissions, Kota Shizawa, visiting fellow with the Center for Strategic and International Studies, commented on the complex reality of the energy demand landscape:
“Fossil fuels are a critical, practical bridge toward a decarbonized future until nonfossil energy sources become competitive and reliable enough to replace them. The priority should therefore be the development and dissemination of technologies to process fossil fuels as cleanly as possible.”
Energy In Depth has repeatedly discussed the important relationship between fossil fuels and renewable energy, as natural gas helps balance the intermittency of renewables with firm, baseload power.
The privilege of rapid decarbonization
The difficult reality is that limits on global fossil fuel production inhibit growth in developing economies. A Center for Strategic and International Studies analysis of United Nations data found that “advanced economies, or the Global North, cannot try to impose strict climate actions on the developing world that could negatively impact economic growth.”
Similarly, Joe Lassiter, professor of management practice in environmental management at Harvard Business School, said in July that developing countries’ consistent objective is to deliver reliable, “365 by 7 by 24 energy” for the their citizens. As a result, Lassiter is highly skeptical of peak oil claims:
“I will be very, very surprised if oil usage peaks in the foreseeable future, meaning a few decades from now. There’s no reason to believe that the global South won’t take any barrel that’s produced anywhere in the world.”
Bottom Line: Hasty predictions for “peak oil” pose a polarizing threat to a secure and cooperative energy transition, especially as world leaders prepare to descend on Dubai for COP28. At a time when global synergy is needed to address climate goals, discrediting ongoing fossil fuel production is unwise and seeks to quiet a key voice in the decarbonization conversation.