As global leaders mull future energy needs and investment plans at this year’s CERAWeek conference, the Chief of the International Energy Agency (IEA) – historically the world’s most trusted source of energy market forecasts – isn’t pulling any punches. In comments on Monday, IEA Chief Fatih Birol said:
“I want to make it clear … there would be a need for investment, especially to address the decline in the existing fields… There is a need for oil and gas upstream investments, full stop.” (emphasis added)
The comments come on the heels of IEA’s announcement that it is considering re-instating its Current Policies scenario into this year’s World Energy Outlook – a move that follows extensive criticism over the scenario’s exclusion from recent WEOs from global leaders, including members of Congress like Sen. John Barrasso (R-WY) and the National Center for Energy Analytics (NCEA) here in the United States.
Birol’s comments are enough for cautious optimism, with emphasis on the cautious. While the return to reality is refreshing, it stands in stark contrast to comments made by Birol in 2023 where he called new oil and gas investments an “unwise economic risk” and in 2021 when, following the IEA’s release of its first net-zero roadmap, he told the Guardian:
“If governments are serious about the climate crisis, there can be no new investments in oil, gas and coal, from now – from this year.”
Time will tell if these latest public statements from the agency are a sign of a return to IEA’s roots or a political flip-flop.
History Isn’t Clear
Birol was historically supportive of more oil and natural gas in the global market, even going as far as to speak out against Democratic U.S. presidential candidates’ plans to ban fracking in 2019:
“Just banning [fracking] would not be good news, not only for Americans but for Europeans…I think climate change is a serious issue – the oil industry, gas industry have to be part of the solution, rather than being the problem or a barrier.” (emphasis added)
And applauding the United States for lifting the crude oil ban and paving the way to export LNG:
“The IEA commends the lifting of the US ban on crude oil exports as well as efforts to streamline regulatory approvals for LNG approvals for LNG exports, which have helped bolster global energy security by diversifying supply options for importers.”
But that same year, IEA ceased publishing its Current Policies Scenario – a “business-as-usual” model used to project future energy demand – in its WEO and replaced it with a different scenario that factored in announced climate and energy policies.
This caused its energy demand predictions to suggest that oil and natural gas could be easily substituted for renewables as long as politicians announced policies supporting such a transition. As we’ve seen in Europe, California, and numerous other places across the world, eliminating oil and natural gas is not as simple as wishing it were possible.
Since changing its focus from a neutral energy market watchdog, the IEA’s forecasts have increasingly become outliers. While the agency recently predicted that global oil demand will peak by 2030, other leading forecasters such as OPEC, Enverus, JP Morgan, Wood Mackenzie, and Goldman Sachs all believe that peak oil is either too far away to predict or significantly beyond 2030.
As NCEA’s Neil Atkinson, the former Head of IEA’s Oil Industry and Markets Division, stated:
“The IEA has decided that, based on current policies, oil demand will peak before the end of this decade. But there’s a real world out there…there is a fair criticism that the IEA is moving away from objectivity and does not sufficiently recognize that there is still a here and now in the energy world.” (emphasis added)
Bottom line: By spelling out the need for additional oil and natural gas investments in Houston this week, Faith Birol signaled that he and his agency may be ready to return to energy realism. Let’s see if he sings the same, honest tune when he gets back to Paris.
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