IEA Still Has Its Head In The Sand As It Predicts Oil Demand To Continue Growing Till 2040

Growing Demand for Oil Till 2040 – Really..??

The premier international agency IEA has not been the best forecasters, as it continues to underestimate the penetration of renewable energy and decrease in fossil fuel consumption. It is more of a follower rather than a predictor of future energy mix and growth. In its new energy outlook while it predicts that 40% of the power production by 2040 will be from renewable energy, it still predicts that oil demand will continue to rise reaching 105 mbd by 2040. The demand according to IEA will be driven by transportation, petrochemicals, aviation and shipping. It thinks that EVs will increase to almost 300 million by 2040 (which is again a massive underestimate in my view, IEA made a huge mistake with solar and wind energy growth and making the same again with EVs).

Even in solar energy, it is wrong as it predicts just 70 GW of solar energy additions every year till 2040, even as the industry is going to install 100 GW in 2017 alone. With solar energy prices falling, demand elasticity will kick in which IEA fails to account for. With solar prices falling below 1 cents/kWh, demand for energy will increase rapidly which I don’t think IEA’s model has factored in. With energy prices almost free, demand will increase exponentially just as it has for other technologies such as smartphones, mobile minutes etc.

Solar Vs Fossil Fuel generation

Also, read why is IEA making unreasonably optimistic projections for fossil fuels, given the sharp fall in renewable energy costs

IEA also has miserably failed to see how exponentially EVs can grow once they reach the inflection point of being cheaper than fossil fuel vehicles.With low to zero investment in fossil fuels, how will millions of these vehicles be sold every year in 2040? Even in other areas like shipping, aviation, electricity will play a huge role. Cheap electricity and very low-cost batteries could replace almost everything that gasoline/ petrol/diesel are used for.

Natural gas estimates are also wildly optimistic in my view as natural gas will also become much more expensive compared to solar/wind plus storage. Using natural gas will also start to look like using coal which causes pollution and global warmings.

All in all, IEA still has its head in its sand and not willing to predict in a reasonable manner. It remains hostage to making linear models even as exponential technologies take center stage. IEA has failed to be right in a 5-year time frame, how you can expect it to come reasonably close in a 25-year time frame!