The BEAT Goes ON,,,,,,,,,,,and ON.......... Oil Stats Are All Over the Place
It’s a Problem for Investors and Environmentalists Alike
To slow the most devastating impacts of climate change, countries will have to agree on how to move away from fossil fuels and toward cleaner alternatives. Today, the world’s biggest energy organizations can’t even agree on how much oil is already being used.
On Wednesday, BP released its annual energy outlook, which tries to chart where the industry will go next. Among its most notable conclusions was that oil demand is likely to plateau by next year; after that the decline rate will depend on how aggressive countries get about reducing their carbon emissions. In a scenario where countries get more serious about achieving a “net zero” emissions goal, oil demand could fall to 25-30 million barrels a day in 2050, from about 102 million barrels today.
OPEC also released its monthly outlook on Wednesday, and came to a very different conclusion—oil demand is still very much on the upswing and there is no sunset in sight. OPEC expects oil demand to grow by 4.1 million barrels a day between 2023 and 2025, more than any other major forecaster. OPEC previously said that it doesn’t expect oil demand to peak until 2045. The Paris-based International Energy Agency, which is funded mostly by oil-consuming countries, expects demand to peak in 2029 and then fall very gradually after that. The Energy Information Administration, a U.S. government agency, has said that a peak could come sometime between 2030 and 2040.
Some of the differences can probably be explained by the fact that the groups have different audiences with different motivations—OPEC members need high oil demand to thrive, while IEA members tend to have deeper climate commitments and a desire for oil prices to be cheap. But the variance in the numbers is becoming so wide that it’s leaving investors with a lack of solid information.
For instance, the reports don’t just differ on what economists think could happen in the future. The forecasters can’t even agree on where demand is today. OPEC’s calculations for current oil demand differ dramatically from other sources, for instance. The cartel says that oil demand averaged 103.5 million barrels a day in the first quarter. The EIA, by contrast, says that oil demand was 101.7 million barrels. One possible factor in the discrepancies is how researchers track barrels of oil that are sold in less-transparent markets, like sanctioned Russian and Iranian crude.
In some sense, the differences are academic. Individuals and businesses are the ones who will decide how much oil to consume, not forecasters. But the projections do have an impact on how broader market players—including lenders, policymakers and investors—views the industry. For that reason, the forecasts have taken on additional importance, and led to sharp disagreements. The IEA and OPEC have not been this far apart in their forecasts since 2008, according to a Reuters analysis. OPEC Secretary-General Haitham Al Ghais said last month that the IEA’s projection that demand will peak in the 2020s was a “dangerous narrative” and will lead to underinvestment and price volatility. He also said that the IEA “unjustly vilifies the industry as being behind the climate crisis.” Republicans in the U.S. Congress have also criticized the IEA’s conclusions as too negative on oil and gas. At the same time, analysts sometimes doubt OPEC supply information, because some countries in the group “cheat” on their quotas by producing more oil.