The Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA), two of the leading global energy forecasters, have long disagreed on demand growth. They agree on this however.
Reuters recently reported that OPEC and the IEA, the world’s most closely watched forecasters of oil demand growth, are further apart than they have been for at least 16 years in their views on fuel use and demand growth.
In fact, OPEC+ stopped using data from the IEA in 2022 when assessing oil due to the significantly different outlooks on long-term oil demand. Another contributing factor was IEA’s controversial 2021 report in which the agency said there should be no investment in new oil, gas and coal projects if the world was serious about meeting climate targets.
Given this context, OPEC actually welcomed a recent IEA commentary entitled, ‘A Strong Focus on Oil Security will be Critical Throughout the Clean Energy Transition’ and authored by Ronan Graham, IEA, Energy Security Analyst and Ilias Atigui, IEA Energy Security Researcher.
The authors commented that, “the threat posed by oil supply disruptions will not disappear anytime soon. Even once demand starts declining, oil will remain an important part of the global energy mix for some time. There is also good reason to believe that oil supply disruptions are even more likely to occur in the coming decades than they are today. This is due to an elevated risk of supply-demand imbalances, increasing supply concentration for both crude oil and oil products, a highly uncertain geopolitical outlook, and a plethora of additional risks including the growing threat of cyberattacks and the increasing frequency of extreme weather events.”
“Given the long-term outlook for oil demand and the risks to the climate from its combustion, the eventual need to scale back production activity is undeniable. However, there is a high degree of uncertainty around how quickly demand will fall, leaving oil companies facing difficult and commercially risky decisions around upstream investment. The consequences of these decisions will have an impact on the security of oil supply, as well as the bottom lines of oil companies.”
While OPEC and IEA continue to disagree on demand projections, this commentary suggested a shared understanding that the energy transition will be uncertain and will require continued responsible management of fossil fuel production.
To read the full commentary, click here.
