IEA and Oil : Track record analysis and assessment of oil supply scenarios in WEO 2000-2013

Abstract: The World Energy Outlook (WEO), an annual publication from the International Energy Agency (IEA), is often considered to be the most authoritative source of future energy scenarios for policy decision makers. The demand and supply scenarios for oil, one of the most irreplaceable resources in the global energy system, are central in each report. For the last decade, the outlook for oil supply in 2030 in the main IEA scenario has been reduced by almost 20 million barrels per day. The aim of this study is to examine the revisions to the oil supply scenarios, both at global and individual country level, and note if and how the IEA has motivated these revisions. The accuracy of past WEO scenarios is quantified by track record analysis and the latest WEO scenario is assessed in detail in relation to current scientific literature. Finally, implications of the latest WEO scenario for the long term oil supply are assessed. It is noted that the IEA generally motivate upward revisions to their scenarios, while downward revisions are often left unmentioned. Some recent revisions are attributed to the financial crises of 2008 and the largest revision in absolute terms is the gradual downward revision of OPEC production motivated by an underestimation of key producing countries’ will and ability to expand capacity. The track record analysis indicates that the accuracy of the IEA scenarios has increased on a five year prediction basis following the extended methodology applied in the WEO 2008. The analysis also shows that the accuracy of scenarios decrease with time. On a ten year horizon, the mean absolute error for the IEA aggregate ‘World oil supply” was estimated to 8.2%. The WEO2013 ‘New Policies Scenario’, with a time frame of 2012-2035, was assessed using decline and depletion rate analysis, and compared to empirically proven rates. The scenario was found to provide a realistic but optimistic view of the future of oil supply. An alternative scenario, with depletion rates in line with the fastest observed regional rates, resulted in somewhat lower production rates throughout the scenario time frame. A long term extrapolation to year 2100 of the WEO 2013 scenario, based strictly on resource and production data from the WEO reports, indicated that oil supply will reach a peak in 2035 and then enter decline for the remainder of the century. A sensitivity analysis showed that changes to the assumed resource base only moves the peak by a few years, but has a significant effect on the rate of the following decline.