IEA Signals Potential Reversalโค on Peak Oil and โGas โฃDemand โขForecasts
LONDON – Theโฃ International Energy Agency (IEA) is preparing to revise its projections regarding peak oil and gas demand, potentially walking back previous forecasts that anticipated a near-term decline, according to a report by Oilprice.com citing analysis from energy consultant Javier Blas. The โshift stems from concerns that the IEA’s โคmodeling has been overly optimistic in its assumptions about the implementation of climate policies and the rapid adoption of renewable energy sources.
Historically,the IEA utilized a “Current Policy Scenario” to reflect existing governmental โpolicies. However, Blas reports this scenario “Historically undercounted solar and windโข power.” Under pressure, the IEA discontinued this scenario, replacing it with the “Stated Policies Scenario” (STEPS),โ which includes policies and โขmeasures not yet implemented. Further complicating โmatters, the agency introduced the “Announced Pledges Scenario,” which “assumed that all the energy and climate policies, plus political aspirations, were met in full and on time.”
Thisโ reliance on assumption-heavy scenarios, Blas argues, contributed โto the IEA’s widely publicized – and subsequently corrected – 2021 “Road Map to Net Zero,” which initially claimedโ no new oil and gas exploration would be needed beyond โคthat year,โข a position the agency reversed months later amid tightening supply and rising prices. โThe implications โof โขthese modelingโฃ choices are now being scrutinized, as they underpinned forecasts predicting the potential for trillions of dollars worth of “stranded” oil andโฃ gas โassets.
Theโฃ IEA’s evolving forecasts have significant ramifications for energy investment decisions and the broaderโ debate surrounding the energy transition.By basing projections on optimisticโ assumptions about policy implementation and technological advancements, the agency may have underestimated the continued demand for fossil fuels, potentially leading to misallocation of capital and hindering energy security.