Today the International Energy Agency published its 2023 edition of the annual World Energy Outlook report which doubles down on its claim that global demand for coal, oil, and natural gas will all peak by 2030.
However as Energy In Depth has written previously, “peak oil” forecasts make good headlines, but often these claims don’t square with reality.
LNG remains in high demand
This contradiction between scenarios and reality is most pronounced in the report’s claims about liquified natural gas (LNG). While claiming that demand for natural gas will peak within the next seven years, IEA simultaneously forecasts major growth in new LNG projects and capacity set to come online over the next decade:
“An unprecedented surge in new liquefied natural gas (LNG) projects coming online from 2025 is set to add more than 250 billion cubic meters per year of new capacity by 2030, equivalent to around 45 percent of today’s total global LNG supply.”
A significant amount of these new LNG projects are located in the United States, reinforcing the importance of U.S. production to global energy security. As a consequence of the forecasted increase in U.S. LNG production, IEA predicts that Russia’s share of internationally traded gas will drop to half of the country’s 2021 share by 2030.
The United States has already played a substantial role in mitigating the global energy crisis prompted by Russia’s war in Ukraine. According to IEA’s report, over the last year, U.S. LNG made up the largest contribution of alternative supply that filled the “triple deficit” left by reduced Russian gas supply, poor hydropower output, and low European nuclear output.
European allies have acknowledged the essential role U.S. LNG has played, and will continue to play, in protecting energy security across the globe. A top E.U. energy official recently told the Financial Times that the European Union will rely on U.S. LNG exports – and consequently, continued investment in natural gas production and LNG infrastructure – for “decades” to come.
Analysts and executives skeptical of IEA’s forecasts
Responses to IEA’s forecast are mixed, with several prominent analysts and journalists expressing skepticism. When IEA previewed this forecast in September, Bloomberg Opinion columnist Javier Blas cautioned against giving too much credence to IEA’s projections:
“This may sound paradoxical, but the International Energy Agency is both the gold standard in global supply-and-demand energy statistics and a poor forecaster of the same data.” (Emphasis added)
Major producers also dispute the practicality of IEA’s “peak oil” and “peak gas” claims.
Back in September, OPEC+ secretary-general Haitham al-Ghais said that such narratives “set up the global energy system to fail spectacularly.” And earlier this month, the cartel released its annual World Oil Outlook, pushing its own estimate of peak oil demand back to at least 2045.
Speaking to the importance of maintaining an affordable and reliable energy supply, Chevron CEO Mike Wirth also disputed IEA’s forecasts in comments this week to the Financial Times:
“I don’t think they’re remotely right . . . You can build scenarios, but we live in the real world, and have to allocate capital to meet real world demands.”
There are many variables that could complicate IEA’s “peak” forecasts. First and foremost is growth in China, as IEA’s predictions for slowed economic growth in the country paired with increased uptake of renewable energy are the main drivers behind its peak oil, natural gas, and coal projections. Differing bets on continued Chinese growth, and the share of renewables that will power that growth, is the primary factor explaining the massive gap between IEA’s and OPEC’s respective oil demand forecasts.
Current and unforeseen geopolitical events – including war in Gaza, which broke out right before IEA released its annual report – may also complicate IEA’s projections, as IEA acknowledges:
“Does this mean that the period of crisis is behind us? And that the energy sector has reverted to the same pathway that it was on before? Neither of these propositions appear to be true. Russia’s ongoing war in Ukraine and instability in the Middle East mean a high risk of further disruption and upheaval.”
Innovation, policy needed to drive emissions reductions
Despite headline-grabbing “peak” oil and gas forecasts, the IEA World Energy Outlook concedes that the supposed end of a growth era for fossil fuels does not mean an end to fossil fuel investment. The agency acknowledges that “simply cutting spending on oil and gas will not get the world on track” for net zero emissions.
Instead, meeting emissions goals requires a combination of reducing emissions from oil and natural gas production and use, and deploying low-carbon and renewable technologies. The IEA report puts a particular focus on two emerging technologies, carbon capture and storage (CCS) and hydrogen fuels, that have great potential to reduce emissions in hard-to-abate industries, especially when paired together.
IEA writes that achieving net-zero scenarios requires supportive policies that prompt investment, like the Department of Energy’s newly announced Hydrogen Hubs program:
“This necessitates policy support for innovation and early deployment. New initiatives and programmes are now in place for fuels such as low-emissions hydrogen and technologies such as carbon capture, utilisation and storage (CCUS).”
Even though a large body of research supports IEA’s assertion that carbon removal technologies are essential for national and global net zero goals, Energy In Depth has previously explained how a dedicated group of activists opposing the technology has spread considerable myths and misinformation about CCS in the United States.
Bottom Line: The IEA makes bold and sometimes contradictory claims about the future of oil and natural gas in its 2023 World Energy Outlook. But beneath tenuous “peak” oil and gas claims, this year’s World Energy Outlook reveals a bullish forecast on U.S. natural gas production and emphasizes the importance of novel technologies like carbon capture in today’s unpredictable global energy environment.
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