Energy Investment Warnings from IEA

Every morning, energy writers sift through significant news in the sector. It’s really quite a task; you can’t write effectively about energy without keeping up with what’s happening.

This Tuesday, a particular headline caught my attention. According to the International Energy Agency (IEA), a story titled, “Decline in oil fields will skyrocket without an investment of $540 billion,” points to a pressing issue. The IEA’s chief, Fatih Birol, emphasized that the decline in output from existing oil and gas fields is accelerating—something that can’t be ignored.

What a shift this is.

For those recalling past comments from Birol and the IEA, this feels, well, quite ironic. Just four years ago, they declared that fresh investments in oil exploration weren’t necessary due to the rise of renewable energy and electric vehicles, which were expected to phase out dependence on oil and gas by 2050.

Back in May 2021, the IEA published a report stating that no new oil and gas fields were needed; governments should focus on projects already in motion. The narrative was that expanding renewables would suffice. It was a rather bold claim.

Interestingly, in August of that same year, Birol told Catholic Church leaders that there was no need for investments in fossil fuels. Just a couple of months later, he warned of potential disruptions in the energy market due to reduced oil and gas spending—so it seems the tone has shifted.

So, what’s the situation now? The truth is that crude oil demand has not plateaued; it keeps rising alongside global economic growth. Historically, whenever the economy grows, oil demand does, too. It’s been a consistent pattern.

It seems the IEA is finally recognizing this ongoing reality.

In a previous piece, I mentioned the changes in Birol’s approach, which appears to be a return to the IEA’s original role—providing factual, reliable information about global energy. This shift is significant, especially since they had steered towards a focus on an energy transition that isn’t entirely happening yet.

An IEA report released recently shows that banks and investors are wary of funding fossil fuel projects, reflecting broader issues that have long affected the industry.

Despite the reasons for this new outlook, it’s refreshing to see the IEA reconnecting with reality.