IEA’s Staggering Oil Glut is Staggeringly Unlikely
The International Energy Agency (IEA) has become a dishonest broker of information because of its renewable energy bias. This week, it reported that there will be a staggering oil glut by the end of the decade.
“Total supply capacity is forecast to rise to nearly 114 million barrels a day by 2030 – a staggering 8 million barrels per day above projected global demand…This would result in levels of spare capacity never seen before other than at the height of the Covid-19 lockdowns in 2020.”
IEA Oil 2024
It’s important to clarify that the surplus in question pertains to spare capacity, not actual supply. Spare or excess oil capacity arises from production exceeding demand. Understanding the oil supply-demand balances that lead to excess capacity is critical.
Reproducing the IEA’s projections to 2030 from its Oil 2024 report was challenging because it did not include OPEC oil supply data for the projection period (Figure 1). Omitting a third of the world’s supply is significant and makes IEA’s conclusions difficult to verify. When comparing data from OPEC, discrepancies were found in the 2022 and 2023 data compared to IEA’s table.
Figure 2 shows that the IEA’s projected oil supply-demand surplus of 6.3 million barrels of oil per day (mmb/d) by 2030 is nearly seventy times greater than the average projections from OPEC and the U.S. Energy Information Administration (EIA) for the same period.
This significant discrepancy raises a red flag, suggesting potential issues with the IEA’s calculations, assumptions, or both. In two decades of monitoring these three agencies, I’ve never encountered a discrepancy of this magnitude.
OPEC and EIA expect supply and demand to be near balance after 2025.
Source: IEA, OPEC, EIA & Labyrinth Consulting Services, Inc.
IEA attributes this questionable supply surplus to the rise of electric vehicles (EVs) and other forms of renewable energy.
“Surging EV sales and continued efficiency improvements of vehicles, and the substitution of oil with renewables or gas in the power sector, will significantly curb oil use in road transport and electricity generation.
“EV sales are set to continue their stellar growth trajectory, resulting in significant fuel savings. This will displace 6 mb/d of gasoline and diesel demand by 2030.”
EA Oil 2024
Unfortunately, the IEA data does not support this interpretation. Gasoline demand is expected to decrease by 1.6 million barrels per day (mmb/d) by 2030—not 6 mmb/d (Figure 3). The agency may be implying a counterfactual argument that demand would have increased significantly more if not for the rise of electric vehicles (EVs), although this claim is not explicitly stated in the report.
Nearly 25 percent of the projected increase in product demand comes from naphtha (Figure 3). Naphtha, a light hydrocarbon mixture, is used as a feedstock for producing gasoline, ethylene, and propylene. It is unclear how much of the increase in naphtha demand should offset the decline in gasoline demand as defined by the IEA.
Additionally, a significant portion of the IEA’s projected “glut” consists of natural gas liquids (NGLs), not oil. Nearly half of the increase in product demand is attributed to NGLs, which are primarily derived from natural gas.
Total oil demand wil increase through 2029 with most of the additions from NGLs.
Source: IEA & Labyrinth Consulting Services, Inc.
The IEA has become increasingly vocal in its advocacy for renewable energy in recent years, a stance I support as part of its mission to raise environmental awareness. However, the IEA’s primary role is to provide comprehensive data, statistics, and analysis on global energy markets to inform decision-making and policy formulation.
IEA’s Oil 2024 report, in my view, lacks objectivity and borders on being propaganda for the energy transition. It is a fundamentally dishonest document that strays from the agency’s core responsibility of presenting unbiased information, and I’m calling that out.
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Hi Art,
I’m a reservoir engineer, and I first saw this story in the Economist. I literally laughed out loud, and quit reading the magazine entirely.
The OECD and it’s leaders, think tanks, and policy teams are in pure denial. We are in human overshoot, and the system can’t sustain itself without cheap and plentiful hydrocarbons slaves.
Mix this with populism, and the future starts to look uglier and uglier.
Evan
Evan,
Thanks for your comments. The childlike belief that we are well on our way toward a renewable energy transition is sad.
All the best,
Art
We should try to get you as a speaker at the University of Wyoming. I think both sides (hycrocarbons vs “renewables”) need a healthy dose of reality when it comes to energy topics (consumption, destroying the environment, etc.).
Evan,
I would enjoy that. I recruited at Wyoming decades ago for Amoco. Jim Steidtmann was a good friend.
All the best,
Art
Love your insights.
Interested in your thoughts on this…
The upside to IEA etc posting hopeful theories like this is a that they publicize and promote the need for change. I am all for change – if it is possible.
The downside is that it misleads the public and investors and that might lead to an underinvestment in traditional energy sources that could cause undersupply that could last a long time with prices skyrocketing, etc.
As an investor in oil and gas majors…this seems to be something that could be profitable at some point in the future.
However it also seems that it could have serious repercussions on the global economy and living standards around the world.
And I also understand that you have stated or implied that the real solution to all of this is for humans to find a way to live without digging all this stuff out of the ground and burning it to create more affluence. (Sorry if I have misstated your position…but that is my impression of it.)
Anyway…what do you think?
Rich,
IEA is playing to the gallery of OECD leaders who have glad to hear their policies validated whether or not it is true.
All the best,
Art
Hey Are. Many yeas back we worked at SCA my respect for your knowledge then as today is great. Please keep it up
Regards,
Karl
Thanks, Karl. I hope that you are doing well.
All the best,
Art
Thank you, Art. Always good reading!
Thanks for the comment, Tina.
All the best,
Art
Hi Art – David J Murphy et al in their paper “Peak oil and the low-carbon energy transition: A net-energy perspective”
(https://www.sciencedirect.com/science/article/abs/pii/S0306261921011673) say:
“We determine the energy necessary for the production of oil liquids (including direct and indirect energy costs) to represent today 15.5% of the energy production of oil liquids, and growing at an exponential rate: by 2050, a proportion equivalent to half of the gross energy output will be engulfed in its own production”.
That would mean a current average EROEI ratio of 6.5:1 and if 50% of energy is required to get energy at 2050 would imply a ration of 2:1. Earlier work by Charles Hall, David J Murphy and others (Energies 2009, 2, 25-47; doi:10.3390/en20100025) has suggested that nothing like modern society could function on such a ratio (although care is required where the ratio is determined).
Assuming this EROEI analysis is credible (ie in the right ball park), it seems none of the petroleum producers or the public bodies like IEA, EIA etc making forecasts like the one you discuss above are taking net energy into account. The socio-economic implications of this omission would be disastrous, as we would be totally unprepared.
One other point if I may. I am confused when they say 50% of total energy is required by 2050 when eyeballing the graph suggests that the amount of energy required to produce energy are more or less equivalent ie 100%. ie no net energy gain to extraction.
Most grateful for your views on the above.
Dugald,
These are academics fiddling while the earth burns. They act like it’s a win if they can prove that renewables are better than fossil fuels. I’m more concerned about the fate of the planet than which energy team wins a losing match.
Here are two posts in which I specifically discussed the problems with the Murphy and Delannoy thesis:
Does Renewable Energy Have a Higher EROI Than Fossil Fuels?
https://www.artberman.com/blog/does-renewable-energy-have-a-higher-eroi-than-fossil-fuels/
Telling the Truth About Our Future
https://www.artberman.com/blog/telling-the-truth-about-our-future/
All the best,
Art
This whole Climate Change theory is a hoax that has gone way too far. Carbon dioxide emissions are airborne plant food and increased CO2 levels are beneficial to the environment. The Climate models grossly exaggerate the heating effect of carbon dioxide.
Green Energy? In what world are solar and wind power green energy? The machines that harness solar and wind produce barely enough useful energy return on energy invested to produce any energy at all. Grid Scale batteries are just a fantasy for the innumerate.
Lee,
Sorry to be blunt, but that is unsupportable nonsense.
I have a post pinned to my X account that states the following:
“I’m no longer going to waste my time arguing with people about whether climate change and ecocide are real.
“If you want to ignore data & scientists who know far more than you or I can ever know, that’s your choice.
“Act out your infantile fantasies somewhere else.”
Have a good life pretending to know more than people whose life work it is to know more than you. I’m sure that surgeons would value your assistance on their next organ transplants.
Art
I guess it’s the belief that if we fervently desire a green energy revolution, it will happen. Guess EIA and OPEC have not caught the bug yet. Thanks again for clearing the air.
Thanks for your comments, Edward.
All the best,
Art
I’ve given a few cursory glance at some IEA video presentations since they recently appeared in my feed. My first impressions were of suspicion. The overly edited word salads left a distinct foul aftertaste of political string pulling.
The commitment to the “happy talk” narrative is a little much to say the least, considering their purported mandate.
But the discrepancy you show here is quite a head scratcher.
Why the hell would they risk that sort of credibility damage ?
What have they been told ? Do they have some game changing privileged information that’s not out there yet ?
It seems like narrative control has become so crucial that organization like these are required to make an incursion into the egregious assumptions realm … and require us to accept suspension of disbelief.
The clock is ticking and evasion of the truth still appears to be the prescription of choice …
UBL,
IEA has redefined itself as the global policy advisor for the renewable transition & net zero. Both are imaginary, impossible & wouldn’t fix the problems even if they were notionally correct.
Now, IEA must promote its position even if it means distorting the facts.
All the best,
Art
I am afraid, Mr. Berman, that we must take into account the increase in demand for oil derivatives, especially in India, a country that we often leave aside but which has the capacity to have high demand for oil and along with it several Asian and African countries.
Juan,
I don’t understand India’s particular relevance to my post. Please explain. The IEA report has detail on all key countries but its conclusions are global and my observations are also global.
All the best,
Art
I am going to directly question the idea that a drop in gasoline demand will lead to a drop in oil demand. According to the Law of the Minimum, oil demand is based on demand for the most limited fuel/distillate. Even if electric cars reduce gasoline demand by a small percentage, (they are a rounding error percentage of the global passenger vehicle fleet), demand for diesel and jet fuel will keep growing and keep oil demand growing. There is no way to distill oil and get diesel and jet fuel without getting gasoline. I would like to hear your thoughts.
This idea is not my own, I read it in Gail Tverberg’s exploration of energy resource depletion “Our Finite World”.
Maximilian,
As I wrote in January in my post “EVs Will Have No Effect on Oil Demand” https://www.artberman.com/blog/evs-will-have-no-effect-on-oil-demand/
“The idea of oil displacement promoted by the International Energy Agency reflects a fundamental ignorance of the refining process.
“There is a sequence of products made in a refinery. It’s not an a la carte menu in which you can order diesel, kerosene and jet fuel but tell the waiter to hold the gasoline. Gasoline is produced first. Even if EVs led to less gasoline demand, it would still have to be produced to get the other products. The only way to reduce oil demand is to use less oil, not some distilled fraction of oil.”
There were so many things wrong with the IEA Oil 2024 report, that I chose to limit my criticism to the most glaring problems especially since I have written about the lack of correlation between EVs and oil demand many times before.
All the best,
Art
All the best,
Art
Thank you for your response. Thank you for taking the time to write this blog. I enjoy reading it.
Kind regards,
Maximilian
Thanks, Maximilian.
All the best,
Art