Sometimes friendly enemies, sometimes wary friends, the International Energy Agency and the Organisation of Petroleum Exporting Countries are the poles of global energy management.
The Paris-based IEA has come under criticism from many sides in the past few years: environmentalists, oil companies and Opec itself.
But the challenges it grapples with pose some important lessons for its doppelganger in Vienna.
The latest round of debate began with an article last month in the Wall Street Journal by Robert McNally, a co-worker of mine at the Columbia Centre on Global Energy Policy, and a former official under the presidency of George W Bush.
Jason Bordoff, founding director of the Centre and previously energy adviser to former president Barack Obama, responded to defend the IEA.
So where does this debate come from, and what does it mean for future energy policy?
The IEA was set up in 1973 at the instigation of former US Secretary of State Henry Kissinger, to counterbalance Opec and ensure energy security in the throes of the first great oil shock.
It brought together most of the Organisation for Economic Co-operation and Development members in North America, Western Europe and Japan – all wealthy industrialised nations. It introduced policies such as conservation, emergency responses and strategic stocks.
The IEA has steadily extended its remit since, covering other forms of energy, adding eastern European members, and taking on as associates India, China, Egypt and other developing countries.
Under the leadership of Fatih Birol, who became executive director in 2015, it has taken on a more active and outspoken role in climate policy. Notably, Mr Birol also served at Opec early in his career.
However, the IEA has faced criticism from environmentalists, notably for its repeated under-predictions of global solar power deployment. They felt it was overly wedded to its origins in fossil fuel security. That was one of the motivations for establishing another body, the International Renewable Energy Agency or Irena, in 2011, headquartered in Abu Dhabi, even though the IEA also analyses renewables.
On a second front, the IEA has several times fallen out with Opec. The two, from their nearby diplomatic capitals, have at times engaged constructively, notably through the Riyadh-based International Energy Forum.
But Opec has also been suspicious of the IEA’s origin – it was, after all, intended to weaken the hold of the leading oil exporters over western countries.
The IEA has typically called on Opec to raise production and implicitly to lower prices when the members of the Vienna organisation often felt their interests lay the other way.
Most recently, Opec has been vocally critical of the IEA over its apparent calls for an end to investment in new oil and gasfields, and its prediction of a peak in demand for all three main fossil fuels as early as this decade.
In November, secretary general Haitham Al Ghais said that the IEA “unjustly vilifies the [petroleum] industry” and that the agency was playing down energy security, access and affordability.
Prince Abdulaziz bin Salman, Saudi Arabia’s Energy Minister, told the World Petroleum Congress in September that the IEA had “moved from being a forecaster and assessors of market to one for political advocacy”.
Mr McNally’s core criticism of the IEA is that it has become excessively focused on the energy transition and climate policy, to the detriment of its original mission. The inattention of European leaders to traditional energy security became obvious in the desperate scramble for oil, gas and electrons in 2022 following Russia’s invasion of Ukraine.
He argues that the agency’s long-term forecasts are no longer objective because they put too much weight on net-zero carbon policies and governments’ aspirations, that are not being delivered in reality or are vulnerable to reversal. He also criticises the decision to drop a baseline scenario in which only current policies apply, and against which all other scenarios could be weighed.
Mr Bordoff and the IEA responded that positing a world in which no policies change is itself politicised. It risks being just as unrealistic as assuming the adoption and delivery of ambitious net-zero policies.
One reason the IEA previously kept underestimating solar deployment was precisely because it did not allow for the progressively stronger policies enacted by countries such as Germany, nor the fall in solar costs that accompanied this.
However, technological breakthroughs are, by their very nature, hard to forecast.
The IEA, and most other analysts, did not expect the substantial growth of US shale gas and oil output. Conversely, advanced biofuels, hydrogen and nuclear power have not lived up to past optimistic expectations – often because they did not enjoy the powerful elixir of policy support that powered solar and wind growth.
In other industries, artificial intelligence, self-driving cars, biotech and space travel have been through several cycles of hype and disappointment.
This has become even more salient since the announcement last month that India was in talks to join. Full membership had previously been restricted to the high-income members of the OECD. It’s not clear by what legal workaround India may be allowed in.
The inclusion of India, which is likely to overtake China as the main long-term driver of growth in energy use and greenhouse gas emissions, would radically change the IEA. Analyst Vandana Hari argues that New Delhi should withdraw its application, as the IEA’s energy transition mission is too far apart from India’s needs for energy security.
Still, Opec should not indulge in Schadenfreude over its twin’s troubles. It too must wrestle with similar problems. How does it safeguard its members’ interests in producing and exporting oil, while acknowledging the reality and urgency of the climate crisis? Global warming and sea-level rise will hurt the GCC states, Iraq, Nigeria and other Opec members.
How does it allow the transition of their economies? How does it engage constructively with its major clients, notably India and China, who sometimes complain of high oil prices, and who have their energy transition plans? And how does it incorporate the profound – if uncertain – long-term effect on oil and gas consumption of technologies such as electric vehicles, renewables and advanced batteries?
In contrast to the IEA, Opec sees demand for oil rising robustly to at least 2045.
With the formation of Opec+, the Vienna organisation has been even more active in broadening its geographic reach than the IEA.
Perhaps now is the time to take a leaf from the book in Paris, and widen its mission in the face of a transforming energy world.
Robin M. Mills is chief executive of Qamar Energy, and author of The Myth of the Oil Crisis
