Energy forecasts are important tools in order to predict future performance, but their limitations need to be recognized and circumscribed.
The International Energy Agency (IEA) was in the news prominently again last week when it released its revised short-term Oil Market Report (OMR). It revised demand growth downward, largely due to current weakness in Asia and expectations of a slowdown due to the rise in tariffs. Supply was adjusted upward, leading to a projected inventory build of over two million bpd heading into 2026. There have always been divergences between forecasts, but in the last few years, differences due to institutional biases have become more profound.
Part of this is due to the three main governmental or international organization forecasters, the IEA, the US Energy Information Administration (EIA), and the Organization of Petroleum Exporting Countries (OPEC), having different missions and mandates. OPEC represents a subset of major producers, while the IEA mainly represents large, developed economies as an affiliate of the OECD.
Decades ago, the IEA used to be perceived as having a bias toward high demand forecasts, exhorting producers to make sure enough was available by investing in upstream expansions. Since the 2010s, however, it has been perceived as having a strong bias toward underestimating oil demand, as its core forecast scenario assumes a lot of shifts by governments intending to reduce carbon dioxide emissions.
OPEC is often accused of excessively downplaying the impact of electric vehicles and demand-management policies.
The EIA is required by US federal law to remain apolitical and independent of the White House. It assumes, for forecasting purposes, that the current laws and policies will remain in place, which also is a bit unrealistic. Even the current data is subject to differing interpretations. An analysis by Energy Aspects showed massive differences in the implied stock builds thus far this year — with the EIA seeing 300 million barrels going into the tanks, the IEA 225 million, and OPEC showing a draw of seventy-five million out of storage.
The Trump administration has harshly criticized the IEA for its prediction that global petroleum product consumption will peak by the end of the current decade, arguing that these forecasts have discouraged needed investment in fossil fuel production capacity. They have a point, at least to an extent — the IEA in 2023 forecast a demand peak in 2028, but now in 2025, the organization sees it coming in 2030.
Where the IEA has been largely correct, however, has been its short-term forecasts in the monthly OMR, where its view since demand returned to pre-pandemic levels in 2022 has been that growth will not resume the previous trendline and will stay below one percent per year. That view has been correct in 2023 and 2024, and it seems to be on track for 2025. The IEA has correctly forecast weakness in Chinese product demand based on the rapid rollout of electric vehicles, even as China has used periods of lower prices to stockpile crude oil. OPEC, by contrast, forecasts demand growth as far as its forecast goes — out through 2050 — gradually slowing, but growing by 1.38 million bpd in 2026.
In the near term, the IEA’s view of 700,000 bpd growth in 2026 is probably closer to reality. China does seem to be closing in on peak demand nationally, and there is likely to be weakness stemming from the economic impacts of the global trade war and new tariffs. OPEC’s 2026 forecast also diverges sharply from the post-pandemic 2022-2025 trendline. It also seems to fit OPEC’s need to have an optimistic narrative to facilitate the Saudi policy shift back toward retaking market share and away from production restraint.
The argument the Trump administration makes about the IEA forecast impacting investment in upstream capacity also seems strained. Private actors in the market and corporate management have realized that there is a very broad degree of uncertainty about the long term and know that the track record regarding the accuracy of all forecasts is spotty beyond five years.
This has driven American companies to reshore a lot of their capital expenditure into US shale production, which, given its shorter lead times, allows for the management of supply and capital investment on a shorter time horizon than the sort of long-lead-time projects of the past.
Thus, the slowing in US capital expenditures we are now seeing is about where oil producers see demand in 2026 and 2027, not beyond that, where they have little confidence. Most forecasts from major financial institutions fall between the IEA and OPEC in the long term, with Goldman Sachs currently predicting growth out to 2034.
About the Author: Greg Priddy
Greg Priddy is a Senior Fellow for the Middle East at the Center for the National Interest. He also consults for corporate and financial clients on political risk in the region and global energy markets. From 2006 to 2018, Mr. Priddy was Director, Global Oil, at Eurasia Group. His work there focused on forward-looking analysis of how political risk, sanctions, and public policy variables impact energy markets and the global industry, with a heavy emphasis on the Persian Gulf region. Prior to that, from 1999 to 2006, Mr. Priddy worked as a contractor for the US Energy Information Administration (EIA) at the U.S. Department of Energy. Mr. Priddy’s writing has been published in The New York Times, The National Interest, Barron’s, and the Nikkei Asian Review, among others.
Image: Shutterstock/panuwat phimpha
