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Why the IEA is Wrong About Peak Oil Demand

Why the IEA is Wrong About Peak Oil Demand

The International Energy Agency (IEA)…

Felicity Bradstock

Felicity Bradstock

Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK.

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U.S. Oil and Gas Boom Poses Challenge to Climate Goals

  • US oil and gas production has surged, driven by energy security concerns and sanctions on Russian energy.
  • The increase in fossil fuel extraction contradicts President Biden's climate pledges and could hinder efforts to limit global warming.
  • The US's substantial contribution to greenhouse gas emissions and its failure to meet emission reduction targets highlight the challenges facing the global transition to renewable energy.
Oil Rig

Over the last two years, the U.S. has significantly boosted its oil and gas production, despite also developing its renewable energy capacity. Following the Russian invasion of Ukraine and subsequent sanctions on Russian energy, the world experienced energy shortages and many countries found their energy security to be under threat. This led many countries in North America, Europe, and other parts of the world to look for alternative energy supplies to ensure they had enough oil and gas to meet their needs. Despite having put restrictions on the development of U.S. crude supplies and strongly backing a green transition, the shortages led President Biden to ask oil and gas companies to boost their production to help decrease reliance on Russia and ensure U.S. energy security. 

Fossil fuel producers around the globe are now on track to almost quadruple the quantity of extracted oil and gas from recently approved projects by 2030. Following the recent increase in oil and gas activity, the U.S. is leading this trend to the potential detriment of its climate pledges. 

The International Energy Agency (IEA) has repeatedly stated that no new oil and gas infrastructure can be developed if the world hopes to limit global warming to 1.5oC. This is the limit that 196 parties agreed upon when signing the Paris Agreement, including the U.S. However, an estimated 20 billion barrels of oil equivalent of new oil and gas have been discovered since the IEA originally stated this in 2021. Scientists now believe that if we continue to develop oil and gas resources, the 1.5oC warming limit could be exceeded within a decade

The U.S. has produced more oil than any other country has done in history every year for the past six years. In 2023, the U.S. broke a record by extracting more oil and gas than ever before, at around 12.9m bpd of crude. This is over double the quantity that the U.S. was producing just a decade ago, and it comes in the wake of President Biden’s ambitious climate pledges. The U.S. also broke gas production records last year, following the development of several new gas terminals, with more in the works. U.S. exports of LNG are expected to double in the next four years based on the current pipeline. 

Although the rise in U.S. oil and gas output was widely accepted following the shortages felt due to sanctions on Russian energy, this is not likely to be a short-term trend. The U.S. expects to hit more record highs for crude production in 2024 and 2025, according to the U.S. Energy Information Administration (EIA). By the end of the year, U.S. oil production is expected to increase by 290,000 bpd to 13.21 million bpd. The government expects to continue to produce near-record levels of oil and gas up to 2050, which will produce a massive amount of greenhouse gas emissions. This strategy appears to be at odds with Biden’s ambitious climate pledges and could put Paris Agreement targets at risk on a global level. 

The U.S. moves will have a significant impact on the global green transition, as the world’s largest producer of crude. Around a third of the world’s planned oil and gas expansion from now until 2050 is expected to take place in the U.S., according to the findings of a recent report. The ongoing oil and gas activities planned for the U.S. are likely to undermine international efforts for a green transition, not only because they will contribute significantly to global GHG emissions but also because they may deter other countries from shifting away from fossil fuels to green alternatives. 

The last three COP climate summits have highlighted the need for high-income countries to support developing states in the establishment of their renewable energy industries and encourage them to leave oil and gas in the ground. However, it is unlikely that poorer countries with the potential to benefit from oil and gas production will forgo fossil fuel revenues in favour of a green transition when the U.S. (and other rich states) continue to earn money from oil and gas production. 

Despite great enthusiasm around the launch of the most far-reaching climate policy to date – the 2022 Inflation Reduction Act – the U.S. is failing to reduce its carbon emissions at the rate needed to meet its climate goals. Greenhouse gas emissions fell by around two percent in the U.S. last year, following an increase in green energy investment, which helped accelerate the Biden administration’s green transition. However, this figure is far below the rate required to meet the government’s target to reduce U.S. emissions by 50 percent by 2030, compared to 2005 levels. As the country’s oil and gas output continues to rise, it is highly unlikely that the U.S. will meet its climate targets, even if it continues to rapidly develop its renewable resources, which will have a detrimental impact on global climate aims. 

By Felicity Bradstock for Oilprice.com 

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Leave a comment
  • fredric longabard on April 13 2024 said:
    Economies need energy to thrive and the green promise of cheap and abundant energy has failed at both those goals. Even with all the taxpayer subsidies green cannot keep its promise and that makes fossil fuels ever more important.
  • Mamdouh Salameh on April 13 2024 said:
    US oil production figures are highly hypes and also questionable. They include 5.2 million barrels a day (mbd) of condensate and natural gas liquids (NGLs) which are neither classified as crude nor are they sold as such. Petroleum exchanges don't classify them a as crude. They are sold as diluents for blending with heavier crudes. So the claim that US crude oil production averaged 12.9 mbd in 2023 is fanciful. The real figure is only 7.7 mbd once we excluded condensate and NGLs.

    And while continued use of fossil fuels does pose a challenge to climate goals, the overwhelming challenges emanate from following illusions like global energy transition and net-zero emissions and setting targets for achieving the unachievable.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

Leave a comment




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