IEA (International Energy Agency): How the agency went from being an honest broker to the Paris Agreement’s ‘armed wing’

Atop that list is the International Energy Agency. As French President Emmanuel Macron recently said, the IEA is now “the armed wing for implementing the Paris Agreement” on climate change. ...
Oil remains the world’s largest single source of energy and fuels more than 95% of global transportation. The price of oil—and who supplies it—is profoundly consequential.

https://www.wsj.com/opinion/trumps-emergency-and-the-international-energy-agency-c164a249

By Mark P. Mills  and  Neil Atkinson

President Trump declared an “energy emergency” in one of his Inauguration Day executive orders. The fallout from that order will affect myriad global organizations, especially ones that promote or invest in the so-called energy transition.

Atop that list is the International Energy Agency. As French President Emmanuel Macron recently said, the IEA is now “the armed wing for implementing the Paris Agreement” on climate change.

Whatever one thinks about the motives for pursuing a “transition” away from petroleum in particular, especially as driven by the Paris Agreement—which the U.S. just exited, again, by executive order—any significant disruption in the availability of oil creates an emergency. Oil remains the world’s largest single source of energy and fuels more than 95% of global transportation. The price of oil—and who supplies it—is profoundly consequential.

The IEA, which has 31 member countries, was created at the instigation of the U.S. after the recession-inducing 400% price shock of the 1973-74 Arab oil embargo. Until recently, the IEA served as an honest broker of information and analysis. Its monthly Oil Market Report is the world’s premier short-term forecast. But storm clouds have been forming over the IEA for a while (noted on these pages a year ago), in particular because of its new approach to long-term forecasts.

In a Dec. 23, 2024, staff report, Wyoming Sen. John Barrasso, then ranking member of the Senate Energy and Natural Resources Committee (and now Senate majority whip), warned: “During the upcoming 119th Congress, the Senate must insist on reforms at IEA.” That report was titled “Restoring the International Energy Agency’s Energy Security Mission: IEA Has Forgotten Why It Was Established.”

Earlier in 2024, Mr. Barrasso wrote to IEA executive director Fatih Birol that “the IEA has been undermining energy security by discouraging sufficient investment in energy supplies—specifically, oil, natural gas, and coal.” The IEA explicitly encourages a decrease in such investments because they can lock in fossil-fuel use—and failure to invest locks out access to fuels if needed. A lot hinges on aspirations versus realistic forecasts.

The IEA seems to have taken as its modus operandi an aphorism of the late John Perry Barlow, a lyricist for the Grateful Dead: “The best way to invent the future is to predict it—if you can get enough people to believe your prediction, that is.”

The IEA’s 396-page 2024 World Energy Outlook predicts things that aren’t happening, notably its forecast that oil demand will peak around 2030. Start with a key World Energy Outlook assumption that is disconnected from reality: that, as all promised, the signatories to the Paris Agreement are undertaking energy transition plans. In fact, none are fully meeting their promises, and most are far behind schedule.

The World Energy Outlook no longer even considers the likely scenario—that the world of the near future will continue with business as usual. The world on its current path won’t see oil demand peak in a decade but instead could see an increase of as much as 10 million barrels a day. For perspective, that’s equal to Saudi Arabia’s output. If growth even close to that happens, but the world invests based on IEA scenarios, the resulting undersupply would cause tectonic price shocks.

The World Energy Outlook imagines “implementing” the Paris Agreement and contains dozens of other flawed, debatable and silly assumptions in its future-looking scenarios. Cheerleading rhetoric on electric-vehicle sales growth, for example, isn’t supported by recent evidence from companies and countries that are slowing plans and mandates for EVs.

Similarly, the report assumes declining costs for EVs. But it ignores the strong possibility of higher prices for battery minerals, a crucial cost factor. The IEA says it still doesn’t have a model for mineral price-inflation arising from supply shortfalls, despite the fact that its own earlier reports point to likely shortfalls. The World Energy Outlook’s China scenario also is disconnected from reality, with coal use shrinking there within a decade. In fact, China has built and is still building hundreds of huge coal plants, and those facilities have an operating life of more than 40 years.

Mr. Birol, the IEA chief, recently highlighted geopolitical and economic security as paramount concerns today. The IEA’s scenarios, vision, and modus operandi put it directly in the political crossfire. One can imagine a future executive order placing the IEA among the organizations the U.S. departs.

Mr. Mills is founder and executive director of the National Center for Energy Analytics. Mr. Atkinson is a former head of the Oil Industry and Markets Division of the International Energy Agency.

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