OPEC launches latest broadside against the IEA over peak oil prediction

OPEC has hit out again at the International Energy Agency, saying its prediction of a peak in fossil fuel demand before 2030 presents a "dangerous" risk to global energy security by stoking calls to end investments in oil and gas projects.

In a sharply worded response to IEA Executive Director Fatih Birol's Sept. 12 op-ed in the Financial Times that declared the hastening decline of hydrocarbons a "welcome sight," OPEC Secretary General Haitham al-Ghais accused the agency of ideologically driven fear-mongering that would destabilize the world economy.

"Such narratives only set the global energy system up to fail spectacularly," Ghais said in a Sept. 14 statement. "It would lead to energy chaos on a potentially unprecedented scale, with dire consequences for economies and billions of people across the world."

With oil demand likely to hit record levels in 2023 -- and grow again in 2024, according to most forecasts -- boosted by the tailwind of the pandemic recovery and continued growth in emerging markets, climate change concerns have run headlong into energy security considerations for policymakers.

The debate is sure to be heightened in the lead-up to the UN's COP28 climate change summit in November, hosted by the UAE, a core OPEC member that is rapidly expanding its crude production capacity in anticipation of future demand for its oil. Neighboring Saudi Arabia is also aggressively investing in new drilling to boost its spare capacity.

The IEA's long-term projections for energy demand, due to be published by the agency in October, will show that expected aggressive adoption of electric vehicles and renewable generation, along with the West's shift away from Russian oil and gas, will cause fossil fuel demand to start falling before the end of the decade, faster than anticipated.

The findings will "undercut the calls from some quarters to increase spending and underline the economic and financial risks of major new oil and gas projects -- on top of their glaring risks for the climate," Birol wrote in his op-ed.

But governments wishing to limit the rise in global temperatures to 1.5 degrees Celsius, as outlined by the UN under the Paris climate accord, and accelerate the energy transition "will require significantly stronger and faster policy action," Birol added, particularly as extreme weather events and geopolitical events stress livelihoods and markets.

OPEC, which celebrated its 63rd anniversary on Sept. 14, is also due to publish its long-term forecast in October, having said in its 2022 edition that global oil demand would not peak until at least 2040, and even then would likely plateau for some years at close to 110 million b/d -- a rise of some 12.9 million b/d from 2021 levels.

Dueling narratives

This is just the latest battle between OPEC, which represents 13 crude exporting countries and has allied with Russia and 10 other key producers since 2017 to manage the oil market, and the IEA, which advocates on behalf of consuming nations, including the US, Japan and a number of European countries.

Birol has previously criticized OPEC and its allies for cutting production, saying they were worsening inflation and harming the world's recovery from the pandemic.

OPEC officials have blasted the IEA's net-zero advocacy, including a warning that no oil and gas projects should be sanctioned in order to achieve UN climate goals, with Saudi energy minister Prince Abdulaziz bin Salman ridiculing the agency as living in "La la land."

In its statement responding to Birol's op-ed, Ghais said OPEC would continue to call for policymakers to focus on reducing emissions through technological innovations, such as carbon capture, and embracing all forms of energy, rather than discriminating against oil and gas.

"Cognizant of the challenge facing the world to eliminate energy poverty, meet rising energy demand, and ensure affordable energy while reducing emissions, OPEC does not dismiss any energy sources or technologies, and believes that all stakeholders should do the same and recognize short- and long-term energy realities," Ghais said.

OPEC, in its latest short-term oil market report published Sept. 12, forecast that 2024 global oil demand would reach 104.3 million b/d, a rise of 2.3 million b/d from 2023.

The IEA, in its monthly oil market forecast on Sept. 13, downgraded its 2024 oil demand projection to a more measured 102.8 million b/d, up 1 million b/d from 2023.