How To Present “Up” As “Down” – The IEA Medium-Term Oil Market Report

Contributed by Robert Lyman © 2023. Robert Lyman’s bio can be read here.

On June 14, 2023, the International Energy Agency (IEA) published its medium-term oil market report including its projection of global oil supply and demand over the period from 2022 to 2028. The IEA, formed in the early 1970’s as a vehicle for the countries of the Organization for Economic Cooperation and Development (OECD) to improve their collective energy security in the wake of the first oil embargo, has transformed itself into one of the leading proponents of decarbonization policies. The headline for its most recent report was therefore that oil use for transport is projected to go into major long-term decline by 2028.

Unfortunately for the IEA’s public relations objective, that is not what the report actually showed, which can be summarized in the following points:

• Global oil demand, which has already made a huge recovery since the pandemic, will continue to increase for the entire projection period.
• Demand in 2023 will rise by almost 3 million barrels per day over 2022, one of the largest growths in history.
• Demand will continue rising until at least 2028, by which time it may reach 105.7 million barrels per day.
• Oil demand in the OECD countries is projected to decline from 45.8 million barrels per day in 2022 to 44.3 million barrels per day in 2028, a 3% decline, but far less than the rate needed to meet the region’s 2030 emissions objective.
• These trends are the opposite of what many OECD governments have been advocating in their climate policies. In fact, among other global energy developments, they will call seriously into question the attainability of the “net-zero emissions” objective for 2050.

The IEA attempted to salvage a good news story from the perspective of decarbonization advocates by claiming that the rate of annual oil demand growth will “shrivel” to just 400,000 barrels per day per year in 2028. To come to this conclusion, however, it relied on some key assumptions. Notably, it assumed that there will be a strong global shift to electric vehicles, sharply increased vehicle fuel efficiency, and a large growth in the use of biofuels in transportation in the US, Europe and China. EV sales, which totaled 10.8 million in 2022, are projected to rise to 25.9 million in 2028, with more than one in every four new cars being an EV.

There are good reasons to question such a projection. The largest increases would be in China, but in 2022 China ended its decade-long program of providing large subsidies for EV purchase. Those subsidies were up to 60,000 yuan, almost $11,200 Canadian dollars, and they will no longer be available. The Biden Administration has introduced generous subsidies and set a goal of making zero emission vehicles half of new sales by 2030, but a different US Administration might take a different view of the need for such incentives. It is not at all clear what would be the source of the greatly increased biofuels production. Finally, while the IEA assumes that India will increase vehicle fuel efficiency standards, the effect of these could easily be exceeded by one of the fastest growing vehicle markets in the world.

There of course is also the possibility of higher global GDP growth rates, however much that would frustrate climate campaigners’ aspirations.

As almost a footnote, the IEA report acknowledged that global upstream investments in oil and gas exploration and production are on course to reach their highest level since 2015, growing 11% year-on-year to US $528 billion in 2023. This, and other factors, are projected to ensure that global oil supply increases fast enough to more than keep pace with demand.

1 Comment

  1. Harvey Dann

    Great news in spite of the Liberal governments and policy people who try to do everything possible to destroy an industry. You as an industry have made great strides in production efficiency, climate and environment issues. It is
    unfortunate that the Mainline Liberal press will not let you tell you tell and describe your story of what you are doing.

    Harvey Dann

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