Kaase Gbakon: IEA’s Mission Drift: A Review of Barrasso’s Report

Feb 5, 2025

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Dr. Kaase Gbakon took his oath of Canadian citizenship in late January. His contributions to Pipeline Online are some of the deepest analysis this publication has been able to offer, and we would like to congratulate Dr. Gbakon on becoming a Canadian!

KEY TAKEAWAYS

  • The IEA’s transition from energy security to net-zero advocacy has sparked widespread debate about its priorities and impartiality.
  • The abandonment of the Current Policies Scenario (CPS) has introduced bias into energy demand forecasting.
  • Reduced investment in hydrocarbons, influenced by IEA projections, may strengthen the geopolitical dominance of nations adversarial to the US.
  • Transparency and policy-neutral baselines are critical for ensuring energy forecasts drive sound decision-making.

INTRODUCTION

John Barrasso, ranking member of the US Senate Committee on Energy and Natural Resources (ENR) and Cathy McMorris Rodgers chair of the US House Committee on Energy and Commerce, sent a letter to the IEA’s executive director, Fatih Birol. The letter dated March 20th, 2024, and described by S&P Global as “strongly worded,” accused the IEA of straying from its original mandate of working to ensure energy security and instead becoming an “energy transition cheerleader.”

A part of the letter reads:

“We would argue that in recent years the IEA has been undermining energy security by discouraging sufficient investment in energy supplies – specifically, oil, natural gas, and coal,”

Recall that in 2021, the International Energy Agency (IEA) published its report titled “Net Zero by 2050: A Roadmap for the Global Energy Sector” (NZE2050), in which there was a section titled: There is no need for investment in new fossil fuel supply in our net zero pathway.

Fatih Birol, Executive Director, International Energy Agency, Paris; Jonathan Price; Kgosientso Ramokgopa, Minister of Electricity and Energy of South Africa; Maria da Graça Carvalho, Minister of Environment and Energy of Portugal; Meghan O’Sullivan, Director, Belfer Center for Science and International Affairs, Harvard University, USA; Muhammad Taufik, President and Group Chief Executive Officer, PETRONAS (Petroliam Nasional), Malaysia; speaking in The Geoeconomics of Energy and Materials session at the World Economic Forum Annual Meeting 2025 in Davos-Klosters, Switzerland, 21/1/2025, 09:30 – 10:15 at Congress Centre – Aspen 2. Stakeholder Dialogue. Copyright: World Economic Forum / Valeriano Di Domenico

The IEA stated:

“No fossil fuel exploration is required in the NZE [Net Zero by 2050 scenario] as no new oil and natural gas fields are required beyond those that have already been approved for development.”

With no new investments, oil supply by the IEA is forecast to decline an average of 4.5% per annum from 2020 to 2050.

The US lawmakers pressed on, that the IEA should be worried that its comments were the basis for policies that would ultimately undermine energy security:

“It should disturb you that biased parties are exploiting the IEA’s forecasts and other products to advocate for policies that undermine energy security.”

Specifically, the letter expressed the concern that the decision to pause permitting for new LNG exports was directly influenced by these IEA projections on natural gas demand.

In a previous edition of this newsletter, in which we compared the Outlooks from the OPEC, IEA and EIA, we highlighted that opposition to LNG development, oil pipeline development as well as the valuation of fossil assets are few examples of decisions influenced by these agencies’ Outlooks.

Fast-forward to December 2024, a few months after the scathing letter and a few days before Christmas, a Minority report by the same Senator John Barrasso is released. The report minces no words on what it has to say. Which is a lot, and an expansion on the contents of the March 2024 letter.

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Figure 1: Cover of the Barrasso Report

Summarily, the report titled: Restoring the International Energy Agency’s Energy Security Mission: IEA Has Forgotten Why It Was Established, submits that the agency has suffered from mission creep, and its original mandate has been taken over by a climate agenda at the expense of energy security.

So, in this article, we provide a summary of the key issues raised by the Barrasso report and the recommendations it provides.

Let’s dive in!

ORIGINS AND SCOPE OF THE IEA

The IEA was founded in 1974 in the wake of 1973-1974 oil crisis when an oil embargo by major producers pushed prices to historic levels and exposed the vulnerability of industrialised countries to dependency on oil imports.

The organization was established on the premise of cooperative oil supply security and policy co-operation. Specifically, this meant the agency was:

  • To set up a collective action mechanism to respond effectively to potential disruptions in oil supply
  • develop energy conservation policies.
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The IEA’s seventeen founding members were:

  • Austria
  • Belgium
  • Canada
  • Denmark
  • Germany
  • Ireland
  • Italy
  • Japan
  • Luxembourg
  • The Netherlands
  • Norway
  • Spain
  • Sweden
  • Switzerland
  • Türkiye
  • United Kingdom, and
  • the United States.

Today, the organization comprises 31 member countries and 13 association countries representing 75% of global energy demand.

However, as the organization’s executive director – Fatih Birol – stated in January 2018 while testifying before the U.S. Senate Committee on Energy and Natural Resources (yes, the same committee on which Sen. Barrasso is a ranking member), the mandate of the IEA has evolved.

Now the IEA looks at:

  • oil
  • gas
  • renewables
  • energy efficiency and alignment issues
  • investments
  • all technologies and their implications for the markets and our well-being.
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HIGHLIGHTS OF BARRASSO’s MINORTY REPORT

The Barrasso report criticizes the agency’s shift towards promoting net-zero emissions goals, which are considered overly ambitious and misaligned with the IEA’s founding principles of energy security and unbiased analysis.

Below, we summarize the key arguments made in the report.

Net-Zero Prioritization

The IEA’s focus on net-zero goals, particularly through the “Net Zero Emissions (NZE) Scenario,” has overshadowed its commitment to energy security. The agency’s projections now emphasize decarbonization, sidelining the importance of reliable energy supply. The IEA’s scenarios appear designed to answer the question: What will it take to decarbonize?

This transition has been driven partly by pressure from environmental NGOs, which have influenced the IEA to align its scenarios with climate advocacy.

Abandonment of the Current Policies Scenario (CPS)

Before 2020, the IEA in its flagship World Energy Outlook (WEO) used to include a CPS scenario as one of three scenarios. The CPS was a policy-neutral baseline for global energy trends (reference scenario).

However, the replacement of the CPS with the Stated Policies Scenario (STEPS) has led to biased assumptions. The STEPS is now the IEA’s reference scenario. STEPS includes announced but unimplemented policies, which distort realistic energy demand forecasting. The report compares this shift unfavorably with the Energy Information Administration (EIA), which maintains a neutral reference case.

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Bias in Energy Outlooks

The IEA’s WEO projects peak oil and natural gas demand by 2030, a stark contrast to other major forecasters like OPEC and EIA. This bias discourages investments in hydrocarbons, exacerbating energy security risks.

Economic and Security Risks

The report argues that reduced investment in hydrocarbons, based on the IEA’s projections, benefits adversarial nations such as Russia and China, which dominate critical energy supply chains for minerals, uranium, and other resources.

Over-reliance on renewables without addressing energy intermittency risks threatens the reliability of global energy systems.

Politicization of Forecasts

The IEA’s leadership, under Fatih Birol, has been accused of using its platform to advocate for specific policies rather than providing unbiased data. Statements like “no new investments in oil and gas fields” contradict the agency’s founding mission.

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RECOMMENDATIONS FROM THE REPORT

The report provided the following recommendations.

  • Restoration of the CPS: The IEA should reintroduce a policy-neutral CPS to provide a realistic baseline for evaluating the implications of energy policies.
  • Rebalancing Priorities: The IEA must focus on addressing energy security challenges, including the concentration of supply chains for critical minerals and nuclear fuels in geopolitically sensitive regions.
  • Transparency and Accessibility: The agency should eliminate data paywalls, ensuring that its methodologies and findings, funded by taxpayers, are publicly accessible.
  • Structural Reforms: The report calls for stronger U.S. advocacy within the IEA’s Governing Board to steer the organization back to its original mission. Senate confirmations for U.S. representatives to the IEA should prioritize candidates who will champion energy security.
  • Independent Oversight: Ensuring unbiased analysis and protecting the IEA from political and NGO influence is essential. This includes evaluating its approach to voluntary contributions, which have increased reliance on earmarked funding.

CLOSING THOUGHTS

Wrong Timing

The timing couldn’t have been worse. The United States has just become the undisputed oil and gas leader on the planet. It has achieved its objective of energy independence cum security after half a century of effort, just as the IEA comes with an Outlook vastly different from only six years prior. Consider this context:

  • The US is now the world’s largest oil producer, exported $34 billion worth of LNG in 2023 – nearly one third of the global total.
  • LNG has contributed $408 billion to US GDP to date since 2016.
  • As of 2024, the US provides 23% of EIA funding which is about the same as it did in 2004.
  • A president-elect who rode on the mantra “drill, baby, drill” to electoral victory.
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The following is a slide from the presentation the IEA made in 2018 at the Center for Strategic and International Studies. It shows US oil and gas production reaching more than 31 MMboe/d in 2040.

 

Figure 2: Slide from IEA 2018 presentation of the WEO2017 showing US oil and gas production to 2040

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To be fair though, at the 2018 testimony before the US Senate Committee on ENR, Fatih Birol expressed his belief in the American potential for renewables. Hear him:

“I believe the U.S. has huge potential to make more use of renewable energies, solar and wind especially, and I was very happy to see that the current support [referring to Production Tax Credits] for the renewable energy policies are continuing in a strong way.”

CPS and STEPS diverge

Figure 2 shows the divergence from replacing the CPS with the STEPS scenario as a reference case. The extent of the difference between the WEO2019 and the most recent Outlook (WEO2024) is stark.

According to the WEO2019, the last year that the CPS was used as a scenario, by 2040, oil demand was projected to reach 121 MMbpd, while gas demand was projected to reach 570 Bcfd. With the STEPS however, the WEO2024 submits that by 2040, oil demand would be 100 MMbpd while gas demand will be 426 Bcfd.

Figure 3: Difference between IEA’s Oil and Gas demand projections under its Current Policy Scenario (WEO2019) and STEPS (WEO2024)

Interestingly, in 2019, the IEA was more bullish in its reference scenario than OPEC on future oil and gas demand! OPEC in its World Oil Outlook of 2019 projected oil demand by 2040 to be 110.6 MMbpd compared to IEA’s 121 MMbpd and gas demand to be 504 Bcfd compared to IEA’s 570 Bcfd.

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Accusations of Bias: Peaking vs Kicking

Barrasso’s report highlighted bias in the energy outlooks.

In our previous newsletter, we had showed graphically the different paths projected by OPEC, IEA and the EIA for oil and gas in their recent Outlooks. While IEA sees a 2030 peak in oil and gas demand, OPEC and EIA see demand still humming along strongly. See figure 3

 

Figure 4: Oil and Gas Demand Outlook according to the OPEC, IEA and EIA

Comparison of the respective reference cases of OPEC’s WOO2024, IEA’s WEO2024 and EIA’s IEO2023 indicate oil demand by 2050 as follows:

–         OPEC sees 120 MMbpd

–         IEA sees 97 MMbpd

–         EIA sees 110 MMbpd

Gas demand by 2050 as follows:

  • OPEC sees 520 Bcfd
  • IEA sees 423 Bcfd, declined from a 2030 peak of 435 Bcfd
  • EIA sees 540 Bcfd

OPEC is most bullish about oil demand, while the EIA is the most bullish on gas demand by 2050.

On Transparency: Looking to the EIA

In our previous newsletter, we pointed out that an outstanding feature of the EIA’s International Energy Outlook (IEO) report is the revelation of the model used in making their assessments in the report’s foreword. This we consider remarkable because such technical revelations are typically reserved for the appendices and not the first word.

In a further bid to give readers a unique view, the EIA aims to be as transparent as possible. They offer detailed model results, detailed model documentation and the model source code of the World Energy Projection System used to produce their IEO.

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…And Finally

Even outside the US government, there are those who have taken issues with the projections from the IEA, and how it veers from other Outlooks.

Enervus in their Enervus Intelligence Report offers that oil demand will not peak or decline before the end of this decade.

David Messler thinks the IEA is wrong and offers his reasons why in this piece for OilPrice.com

Mark Finley, fellow in energy and global oil at Rice University’s Baker Institute suggests institutional biases are also to blame for observed disparities between the Outlooks. Finley fears the loss of objectivity and the rise of the “aspirational” Outlook. You can find his thoughts on the matter here and suggestions on how to read the reports outside institutional bias.

Sara Vakhshouri, writing for the Atlantic Council also spotlighted the challenges of operating in energy markets complicated by the divergent Outlooks produced by the energy analytics organizations. Vakhshouri advocates that classical forecasting drive policy, and not the other way around given the energy security implications involved.

I do not think we have heard the last of this issue. The IEA and EIA release their Outlooks in October. It will be interesting to see what scenarios are considered in the IEA’s WEO, and how it compares with EIA’s IEO – I expect so much to have happened between now and then.

 

If you enjoyed this edition of the Energy Business Analytics newsletter, please subscribe for more content like this!

 

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