The credibility of the International Energy Agency continues to wane as it continues to advocate for an urgent shift towards a decarbonized economy. According to the IEA, global fossil fuel demand must decline 25% by the decade's end to ensure the world is on track for net zero by 2050. However, Christyan Malek, JPMorgan's head of EMEA energy equity research, recently shared a note with clients about an emerging "very volatile supercycle" for fossil fuel, where demand is set to rise through 2030, sparking what he believes could be a massive global oil deficit that will propel prices well into the triple-digit territory through the end of the decade.
Let's begin with the OECD-funded energy watchdog's latest forecast, which says coal, oil, and natural gas demand must decline by at least a quarter to reduce greenhouse gas emissions and keep the world on track for net zero by the mid-part of the century. At the same time, it argues that the clean energy supply must exponentially rise to avoid shortages and price increases.
The IEA said "stringent and effective policies" under its forecast would "spur clean energy deployment and cut fossil fuel demand by more than 25 percent by 2030 and 80 percent in 2050".
It forecasted global oil demand will fall by 100 million barrels a day to about 77 million by 2030, adding natural gas demand should slide from 4,150 billion cubic meters in 2022 to 3,400 bcm by the end of the decade.
IEA said the slide in demand would involve a 75% reduction in energy sector methane emissions by 2030, which would cost an estimated $75 billion or about 2% of the oil and gas industry's net income in 2022. It pointed out "positive developments" in the clean energy space, including rapid adoptions of electric vehicles and solar panels.
The agency's latest projections come weeks after IEA boss Fatih Birol said, "We are witnessing the beginning of the end of the fossil fuel era, and we have to prepare ourselves for the next era." He noted global oil demand growth will peak before 2030 as the shift to clean energy economies picks up pace.
Birol's comments were immediately met with a rare rebuke from OPEC, who said: "It is an extremely risky and impractical narrative to dismiss fossil fuels, or to suggest that they are at the beginning of their end."
"In past decades, there were often calls of peak supply, and in more recent ones, peak demand, but evidently neither has materialized. The difference today, and what makes such predictions so dangerous, is that they are often accompanied by calls to stop investing in new oil and gas projects," the cartel said.
OPEC Secretary General Haitham Al Ghais also said the IEA's "narratives only set the global energy system up to fail spectacularly. It would lead to energy chaos on a potentially unprecedented scale, with dire consequences for economies and billions of people across the world."
IEA has gone from a market observer to a green energy cheerleader and is undoubtedly risking its reputation by pushing climate change narratives. The problem: there's no imminent climate catastrophe, and the world doesn't need to destroy the economy for rapid energy transition.
In fact, JPM's Malek sees the future much differently than IEA. He said, "Put your seatbelts on. It's going to be a very volatile supercycle."
The energy guru expects a perfect storm to unfold, where a lack of investment in new oil production, coupled with production cuts from OPEC+, will only lead to much higher prices.
On top of all this, Malek expects the global oil deficit to hit a record 7mmb/d in 2030, a staggering projection difference from the IEA's.
To sum up, the IEA's credibility is at risk by promoting 'green' propaganda (last month, 1,600 scientists said there is no climate emergency).