Climate Politics Neuters an Energy Watchdog

Fatih Birol from IEA in Oslo, Norway. Ole Berg-Rusten/NTB/via REUTERS    (via REUTERS)
Fatih Birol from IEA in Oslo, Norway. Ole Berg-Rusten/NTB/via REUTERS (via REUTERS)

Summary

The International Energy Agency once provided solid information. Its reports can no longer be trusted.

The U.S. and other oil-importing countries established the International Energy Agency in 1974, a year after the disruptions of the Arab oil embargo. The IEA’s founders intended to create a multinational organization that would bolster energy security by providing authoritative data and analysis; scrutinizing energy markets, policies and geopolitics; and orchestrating responses to emergencies. But today the IEA looks more like a climate-obsessed nongovernmental organization. As IEA members gather this week in Paris, they should consider several steps to restore the agency’s reputation and bolster energy security.

For most of the past five decades, the IEA fulfilled its watchdog duties. It became the gold standard for timely data, impartial analysis and forecasts devoid of political bias. The agency navigated energy crises, providing data and policy coordination during the two Gulf Wars, the 2019 Iranian attack on Saudi Arabia’s Abqaiq oil facility, and various natural disasters affecting energy supply and basic energy trends.

Unfortunately, in recent years, the IEA has succumbed to politicization and strayed from its security mission. In 2020 the IEA bowed to enormous pressure from climate activists and ceased publication of oil and gas demand forecasts that didn’t show demand for those fuels would soon peak because of imaginary future climate policies. Green groups had been angry over IEA baseline forecasts showing what the activists regarded as too much oil and gas demand. This was because these baseline forecasts assumed only the laws currently on the books and didn’t engage in conjecture about future green policies. As a result, IEA’s influential demand forecasts now reflect wishful thinking about the timing and cost of a peak in oil and gas consumption.

IEA’s capitulation to political pressure transcends mere technical debates among energy-forecasting experts. Bullying the world’s respected energy authority to mislead the world into thinking that oil and gas demand will soon peak might align with the preferences of certain governments and activists. But the distortion and politicization of the IEA’s once-respected forecasts pose significant risks.

Skewing forecasts to signal a near-term peak in fossil-fuel demand perpetuates the myth that there’s no need for further investment in new oil and gas fields. The IEA has announced that under its imaginary scenario, in which the world marches toward “net zero" emissions, new investments in oil and gas won’t be required—and therefore none will be permitted. The media and activists have gleefully interpreted the IEA’s observation as a plea by the world’s energy authority to ban new oil and gas investment, with little clarifying pushback from the IEA. In the past few weeks, the Biden administration has jumped on the IEA’s forecast for a near-term peak in natural-gas demand, using it as a key rationale for halting the processing of applications for new liquefied natural gas projects.

Basing decisions to limit or prohibit investments in oil and gas on official forecasts influenced by political agendas undermines energy security and borders on energy self-sabotage. Fossil fuels lifted humanity from millennia of squalor, darkness and immobility. For decades fossil fuels have accounted for 80% of global energy consumption. While renewables are growing strongly from a small base, oil and gas will continue to power modern society. By encouraging calls to ban oil and gas supply, an agency established to protect consumers against painful energy crises is helping to ensure the next one takes place.

The IEA’s cave-in to zealous green censors presents another significant risk: Without unbiased, policy-neutral baseline forecasts, elected officials can’t evaluate the trade-offs, costs and benefits of energy and climate proposals. Pulling the wool over officials’ eyes is especially dangerous as policymakers propose radical and potentially exorbitant climate measures. President Biden wants to ban natural gas and coal, which account for 60% of the nation’s power generation, in all electric plants by 2035. That’s the same year some states plan to outlaw the sale of new gasoline-powered vehicles.

The world has enough climate NGOs. What it needs in a time of energy-roiling conflicts in Europe and the Middle East is an impartial and respected energy security agency. The U.S. and other IEA members should urge the agency to resume producing unbiased, policy-neutral forecasts. The IEA should also clarify that it opposes any disastrous halt in new oil and gas supply. And it should follow the example of the U.S. Energy Information Administration and make all taxpayer-financed IEA data, assumptions, and methodologies available to the public.

The world’s energy-security watchdog has gone missing. With energy risks and challenges aplenty, all IEA members must restore the agency’s credibility and walk it back to its vital security mission.

Mr. McNally is an energy consultant and author of “Crude Volatility: The History and the Future of Boom-Bust Oil Prices." He served as a special assistant to the president on the National Economic Council, 2001-03.

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