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9 March 2022

Incompetent EIA shows blindness to transition in AEO2022

The US Energy Information Administration needs to be shaken up. In its latest Annual Energy Outlook, released this week, the group continues to be blind about any kind of transition in the energy sector – it still expects oil and gas to be “the most consumed sources of energy in the United States through 2050.”

Let’s be clear the EIA is a great source of information on what’s happening today, but no-one should take its ability tor see the future seriously.

The EIA has fallen into the same trap as every other analyst house has for as long as we can remember. It is following the market as it is today,  extrapolating incremental increases in the penetration of clean technology; assuming endless growth in potential for exports and GDP; and failing – as they did for coal in 2013 – to see that anything could upset the view of the world that they have held for the entirety of their soon-to-end career.

This is clear from the EIA’s initial assumptions, which infer that the current laws and regulations as of November 2021, as well as views on economic and demographic trends and technological improvements, will remain unchanged. Clearly has not looked at anything coming out of its own government recently.

Its stance is that it cannot factor in what has not yet happened. So it neglects the fact that we are almost certain to see some sort of carbon tax applied in the US over the coming two years – many of its exports to Europe will certainly face some sort of emissions-based tariff. It assumes that the federal government will make no further efforts to FULLY decarbonize the country’s power sector by 2035, nor will it pursue the huge developments it is making in utility-scale solar or offshore wind power.

It does not assume that there will be a point when no new oil pipelines in the US are built, or that fossil fuel players will be offered any incentives to retire their plants early as they have in Europe. It makes no mention of what will happen now that solar-plus-storage facilities produce cheaper energy than natural gas plants. Nor does it consider what will happen when this is already the case, regardless of today’s elevated gas prices at a point where all fossil fuel assets are on the verge of becoming economically stranded.

Let’s start with electric vehicles. The EIA report concludes that petroleum use from the transport sector will remain pretty much constant between now and 2050, never dipping below the figure seen through Covid-19. It assumes that while electric vehicle sales will quadruple in the US, the share of sales of internal combustion engine light-duty vehicles decreases from 92% in 2021 to 79% in 2050. This is contrary to the fact that none of its car makers will be making internal combustion engines after 2035 and certainly no foreign car-makers.

Even just watching adverts on TV, or listening to conversations around town, it is clear that this is not the case. Barely a single automaker is pushing the sales of their ICE vehicles anymore, in fact most have pledged to stop making them from 2035.

Having spent 20 years looking at the behavior of consumer-led technologies, the Rethink opinion for increasing uptake on disruptive technologies is based on the three rules: “I want one, I can afford one and I know someone who’s got one.” This sees demand in a new market accelerate once all three conditions are reached, and in this case when there is a strong local brand (Tesla) and when prices fall it will be curtains for the internal combustion engine.

We’re already at the start of this curve: EV sales grew 102% between 2020 and 2021. In the UK and France, 18% of vehicles sold in January were plugin models, yet the EIA doesn’t see the US reaching this level until mid-century. Rethink Energy expects that it will surpass this level of electric sales in 2025, with nearly 100% of all passenger vehicle sales being electric models from 2036 onwards. Having peaked in 2020, we expect that the oil demand from US passenger vehicles will fall by 65% by 2050 – and even that is slower than any other developed economy.

Because of these ridiculously slow penetration rates of clean technology – that presumably the EIA has carried across the entirety of its modelling – it predicts that the average electricity growth rate in the US will be just 1% between now and 2050, when in actual fact it will rise by well over 50% as cars, industrial processes like steel-making and home heat and transport all shift from oil and gas to electricity.

In Rethink Energy’s upcoming forecast for Annual Primary Electricity, demand for electricity in the US will grow by an average of 2.5% per year, with rapid electrification in sectors including transport, steelmaking, fertilizer production, and home heating, as well as an increased need for long duration power storage.


The other thing that is inexcusable from the EIA is its persistence with outdated metrics for primary energy. Using ‘quadrillion British thermal units’ is laughable in an era of unprecedented electrification. Even the International Energy Agency switched to TWh last year, making it far easier to see the math behind what is going on.

As an example, the EIA refers to energy consumption by the electricity sector in the US as around 40 quadrillion BTU, which equates to around 12,000 TWh of raw energy. By its own figures, the EIA stated power demand in the US to be 3,879 TWh in 2021 – just 32% of the consumption figure it has given in the AEO 2022.

The disparity in these figures exists because the EIA is using the raw fuel content of fossil fuels, rather than the useful energy that can be extracted from them in the majority of their uses. The average gasoline engine, for example, are often around 20% efficient, meaning that the role of gasoline in the energy mix is being hugely overstated. Conversely, wind and solar cannot be measured as a raw material, so their figures are only given as the 100% value of the useful energy they provide.

With this warped view of the energy mix, the EIA pushes forward the agenda of the oil gas industry, in a vain attempt to make them look indispensable. Rather than natural gas use peaking in the next decade, the EIA is pushing the idea that it’s use within electricity generation will actually rise by up to 30%. It believes that US – at all costs – must and will continue with the same rates of imports and exports of oil and gas that it is currently trading today.

It’s argument for oil production rising are the economic conditions of high oil prices, with undisrupted supply from the US. It is entirely blind to idea of a collapse in demand that will come from the mid to late 2020s, it has even put scenarios around ‘low oil price’ and ‘low oil and gas supply’ in a largely transparent font. Following such logic will see businesses fail, with ripples that will be felt across the global economy.

By all means trust the EIA to accurately report what has happened in the past, but do not trust it with a picture of the future.