Has the U.S. Been Playing Loose with Oil Market Data? 16 comments
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Jim Morrison once sang about “Weird scenes inside the gold mine.” Perhaps it should have been weird scenes inside the energy agency.
The International Energy Agency, or IEA, is a 35-year-old quasi-political body headquartered in Paris, France. It was set up in 1974 in response to the budding energy crisis. The IEA’s main focus, as one might expect, is tracking the global oil market. Other energy markets are tracked and studied also.
Every year the IEA publishes its highly anticipated “World Energy Outlook,” or WEO, which runs hundreds of pages long. For the 2009 WEO, just recently released, the executive summary alone is 17 pages.
The weirdness came earlier this week when the U.K. Guardian, a British newspaper, accused the IEA of inflating oil reserves in its projected forecasts.
“The world is much closer to running out of oil than official estimates admit,” The Guardian reports, “according to a whistleblower at the International Energy Agency who claims it has been deliberately underplaying a looming shortage for fear of triggering panic buying."
The Guardian then went on to suggest that “serious questions” had been raised about the accuracy of the IEA’s forecasts. Of particular concern was the latest report, with the U.S. taking an “influential role” in “encouraging the watchdog to underplay the rate of decline... while overplaying the chances of finding new reserves.”
Were the IEA to be truly fudging the data, this would be major news, as a number of sovereign governments rely heavily on the IEA for stats. Indeed, for many facts and figures regarding global oil consumption, there is nowhere else to go.
Sharp Response, but a Yawn From Crude
The IEA’s response to the explosive allegations was swift and direct.
Nobuo Tanaka, the IEA’s executive director, said peevishly that “We have always been warning and warning,” and that it is no secret the world will need “45 million more barrels per day” by 2030.
Fatih Birol, the IEA’s chief economist, declared himself “surprised and disappointed” at the charges, adding that he was “up to now criticized as being too alarmist.”
Biroh also pointed out that last year’s outlook was “a wake-up call to governments,” and that the IEA’s decline rate numbers “are the highest among our peers.”
And what of that ultimate judge, the oil market itself? Did the much-feared panic buying materialize upon word of a potential cover-up? No. Crude oil, locked in a mostly sideways trading range below $80 per barrel as of this writing, hardly responded at all to the news.
The chart at right (courtesy of the WSJ) shows IEA projected oil demand heading out to 2030 for the big three – the United States, Europe and China. (The idea of seeing two decades into the future is absurd on its face, but we’ll leave that alone for now.)
Note that the green bar, representing oil demand for the United States, is the tallest by far (and remains so in 2030). The red bar, representing China demand, is taking off like a rocket, while blue Europe’s rate of oil consumption slowly drifts down.
Part of the reason the oil market yawned, in the short term, is lackluster American demand prospects. Because America is such a huge consumer of oil in the here and now, weakness on the home front is harder for oil to overcome. U.S. distillate stocks – seen as a good proxy for oil demand overall – are at a 26-year high, which means consumers and businesses are using less of the black stuff. Looking ahead a few quarters, U.S. oil demand is expected to fall in 2010 for the first time in decades.
Four Areas of Influence
One might say the oil market is responding to five areas of influence these days:
• Trends in the U.S. dollar (and other major paper currencies).
• The short-term supply and demand outlook (dominated by a weak U.S. economy).
• Long-term forecasts for rising emerging market demand (particularly China).
• “Peak oil” concerns and the potential dwindling of long-term energy reserves.
• Geopolitical concerns and the “fear” premium (dormant now, but with potential to surprise at any time).
Given these factors, the mix suggests downward pressure on oil in the near term (as the dollar shows sign of bottoming and the U.S. economy tails off), with renewed upward pressure in the mid to longer term.
The Oil Drum, a popular energy Web site, shows another reason for concern in the chart below (compiled from IEA data).
Roughly 40% of the world’s oil supply comes from OPEC members (Organization of the Petroleum Exporting Countries). The rest comes from non-OPEC members.
The chart above shows how non-OPEC supply actually peaked a number of years ago, with the high-water mark for production hitting some time in late 2003.
Others may disagree, but to your humble editor oil looks vulnerable here. That is very much a shorter-term observation, however. In the longer term, oil’s rise seems as assured as the dollar’s ultimate demise.
What’s the Motive?
If the Guardian allegations are true, why would the United States be pressuring the IEA behind the scenes? Perhaps because weakness in the U.S. economy is the Achilles heel of the whole “V-shaped recovery meme” that has whipped investors into a frenzy.
The bulls have managed to fix their gaze on the über-stimulated Chinese economy – somehow overlooking the major red flags – while averting their eyes from the unfolding horror that is the U.S. economy. Were the price of oil to rise too far, too fast, it would become all the harder for Washington and Wall Street to ignore the intense pain of Main Street.
In that light, a few gentle nudges in the IEA’s ribs would not be a surprise. As Morrisey sang in “The Lazy Sunbathers,” the bulls are now “too jaded to question stagnation”... and the powers that be want to keep it that way.
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This article has 16 comments:
www.tsl.uu.se/uhdsg/Pu...
It boils down to the IEA raising the assumed depletion rates for fields from historic norms without saying why, which would mean that more oil would be available faster than would otherwise be the case.
Uppsala University posits similar depletion rates to those in the past - the least hypothesis - and comes out to total production FALLING from around 85mb/d today to around 75mb/d by 2030, which has profound implications for economic growth - it is unlikely to happen.
In fact we will be facing falls in gross economic output, until we can do something to de-link from oil - as the text remarks the correlation between oil use and economic growth is pretty much 1:1
The IEA had given oil supplies in 2030 of around 101mb/d, so from an increase in supply if you don't make the entirely unexplained leap in predicted exploitation rates, we go to a situation of absolute decrease of around 13%
This is in the context of a population which will increase from around 6 billion to around 8 billion over the same time period.
Putting the numbers together, that gives us a per capita oil supply of around 2/3rds of present supplies.
Goodbye growth and all the plans on which financial planning by the Government, pension plans etc are based.
On Nov 13 05:17 PM PARTICULARMEN wrote:
> Warren Buffett: The financial panic is over (Reuters headline)<br/>
>
> Why Warren Buffett pays $34 billion (market cap) for BNI instead
> max. $24 billion when market DJIA was at 6500?
> Why BRK depends on Goldman Sachs bankers?
> Why Buffett is buying stuff at the peak of the market instead of
> waiting to buy cheaper in a very short time ?
> Does he think DJIA at 10000 is "cheap" ?
> Why he wanna split his highly priced BRK.B shares and make it appeal
> to average John Q. Public investor ?
> He buys BNI at the top to calm the matket panic and "make you buy
> too".
> Why BRK is not selling all their stuff, when W. Buffett knows very
> clear that DJIA will be 5000 soon and will bottom only at 2000 that
> will hit him too?
> Find out in WARREN BUFFET? link
> snipr.com/t7w23
But where is my name? I'm from Uppsala University too - me, Fred Banks - Ferdinand E. Banks - , the leading academic energy economist in the world. What's going on here?
Oh yes, now I remember. I told one of the authors that he needed to spend more time drinking and dancing in those great Uppsala student clubs, and leave the energy economics to someone who could do primary school mathematics. As for the boss man, Aleklett, I'll give him here - on this distinguished site - the warning I should have given him last year: if he ever shows up again in a seminar at this university's economic department,, I'll make him feel so inferior that he'll wish that he never heard the word oil. The same goes for his flunkies.
That IEA stuff IS pretty rotten, isn't it?.
Oil prices are high due to the dollar and instability in the world. Peak oil proponents don't help running around playing chicken-little. Lots of exploration and finds in deep water. Remember, we could not extract oil from deep water 50 years ago. 50 years ago, the Bakken was thought to be unrecoverable and extracting oil from oil sands seemed beyond reach. Technology is the Van Helsing that will keep driving a stake in peak oil. Might it be more expensive, yes, until some smart guy figures out a way to make money. Just how many times are we going to run out of oil anyway?? I have lost count. We have far more pressing problems than wrapping oil in the remains of Malthus.
The IEA report is a joke. Just where is the oil going to come from?
Most oil fields are declining and we are finding less than 1 bbl for every 3+ we use. Within 5 yrs Mexico and the North sea will be so little as not a factor other than push the demand they cared for on the other depleting fields.
But a high price for oil is a good thing and will happen. The only difference is whether Iran, Russia, oil dictators and big oil will make windfall profits or the gov make oil pay it's full costs in a fossil fuel tax which can be used as a tax cut, help switching to other fuels, more eff vehicles and paying down the deficit.
Why do we support oil subsidies with huge tax breaks and Persian Gulf military, oil wars and imported oil costs? These costs are only there because of oil and should be in them instead of in our income taxes, health care, etc costs. No?
Until we put the full cost in oil, our economy will never pick back up and next yr will cause another recession, maybe before we get out of this one!!
Here is how to get off imported oil and make our economy work again.
Here is how to do this better for jobs. We can have a stimulus that costs almost nothing to the taxpayer, in fact paid a lot by Iran, Russia, oil dictators!!
How is start up loans for RE companies and energy eff ones. Let most anyone with a good business plan through the SBA get start up loans to build or install homes. small business size windgenerators, solar CSP unit, CHP, small lightweight, aero 3 wheel EV's, NG for trucks, semi's, etc. Then loans to buy, install, etc these.
Loans for home, building eff upgrades from windows, insulation, etc are next. This would put construction, material workers back to work.
Banks have shown they won't loan so other methods may be needed like the SBA.
All these can be paid for in energy savings in 5 yrs so no new income costs either. This will create about 3 million jobs directly and probably 6 million indirectly of people supporting them.
Next is a fossil fuel tax to pay their full cost of the direct, indirect subsidies we already pay in our income tax, health care, etc. it's time those who make, benefit from those costs to pay them It should be a $1.50/gal on oil and about double the price of coal.
But you say a tax will kill the economy. Not if it's put in over 2 yrs at 4% each month and loans given to buy more eff cars, etc to cut people's costs. Switching trucks, semi's to NG is very cost effective now being under 50% of the cost of diesel/gasoline. This can in 5 yrs cut imported oil needs completely.
The beauty of this is oil, coal will drop in price making Iran, Russia, oil dictators pay most of the oil tax, coal costs is only 15% of your electric bill so it won't go up much.
But new, more eff cars, trucks, EV's, PHEV's and mass transit will create more new jobs too.
The fossil fuel tax revenue, 1/3 would go to a tax cut so those people paying it have the extra money needed if they continue to use the same amount or better, use less and have extra income, the more likely outcome. 1/3 to to help switching to more eff cars, trucks, homes, buildings and 1/3 to balance the budget fossil fuels have been a large part in making.
So this program would have a net increase of about 8-10 million jobs of both direct and supporting those who have the new jobs, solve our imported oil problem, let us leave the Persian gulf between the 2 are about $1T/yr in a few yrs if we don't, stop subsidizing our enemies, oil/coal corporations and balance the budget.. All at little cost to the gov, in fact get rid of our debt on our children and make our country strong again.
Or we will be broke, at war, our enemies strong and we will be weak. To me it's the only real patriotic way to go
Your plan may not be perfect, but it is better than most, and it would be a start in a better direction.
There are too many people in our government too much afraid of offending the present true rulers of the world , the Saudi Royal family, to get started and get something done.
Of course, they are aided and abetted , directly and indirectly by powerful domestic and world oil interests, so they have plenty of help.
Until our "leaders" get off the dime and start implementing good ideas like yours and a few others, we remain at the mercy of the same people that destroyed the World Trade Towers, and whose countrymen were protected by the Bush administration and hastily flown out of our country even before they could be questioned.
Do you know of any other group in the world that is afforded this treatment by our government?
Personally, I am tired and outraged at being the unwilling subject of tyrants and dictators -------- ( even so , their country has some very good , benevolent and bright people which is usually the case) ------ because of a lack of planning and necessary action by my own countries elected representatives.
I like it! In fact, if the coal industry had to bear it's full cots for the dmage it does, never mind carbon taxes, it would be much reduced.
The true cost of oil is at minimum not dissociated from the costs of maintaining a massive war machine - what wouldbe the calculus to arrive at the best expenditure if we did not have to maintain security of supply from the Gulf and elesewhere?
As an interim measure before introducing electric cars, liquified natural gas can certainly do the job of proividing at minimum power for truck transport.
Both the building of a proper rail network and improving insulation, building air source heat pumps etc would certainly put a lot of people back to work.
'Just how many times are we going to run out of oil anyway??'
Just once. Hubbert correctly predicted a peak in US oil production in the 60's, and the peak in world production is around now, give or take a few years, as it may have already happened.
In any case, the phrasing indicates a profound misconception of the nature of peak oil, as we will not run out, but rather oil will become progressively scarcer and more expensive.
Note that the Uppsala University figures give present production at around 85mb/d, and that in 2030 as 75mb/d - far from 'running out' of oil, but nevertheless the change from increasing prduction of cheap oil to decreasing production of expensive oil is going to have the most profound consequences over the coming years.
After the Recession, Will the World Face an Energy Crisis?
Here's the bad news about the global recession's potentially coming to an end: the recovery could spark a massive energy crisis with increased demand for fossil fuels from China and other developing countries, tighter oil supplies and skyrocketing oil prices. And this is just in the near future. The longer-term picture looks even more daunting.
Too fearful to publicise peak oil reality
Take the 2008 edition of World Energy Outlook, the annual report on which the entire energy industry and governments depend. It included the table also published by the Guardian today, and the version I saw had shorter intervals on the horizontal axis. What it made blindingly clear was that peak oil was somewhere in 2008/9 and that production from currently producing fields was about to drop off a cliff. Fields yet to be developed and yet to be found enabled a plateau of production and it was only "non-conventional oil" which enabled a small rise. Think tar sands of Canada, think some of the most climate polluting oil extraction methods available. Think catastrophe.
Link -
www.chrismartenson.com... d-fallout-iea-leaks/31343
==========
The author of this article, Chris Martenson, knows what he is talking about and no just about Peak Oil!
The above is only a small portion, I reccommend the full read!
Why do those who link peak oil to catastrophe ignore the extant status of so many other something elses? Nuclear is held up by secular religionists of the tree-hugger flavor. Natural gas is held up by capital costs not yet attractive due to oil (Hey! Wake up! You need to go to sleep!), solar, wind and hydro are held up by predictable innovation refinement cycles exactly like the addition of landing gear to the DC-3 thirty years after Kitty Hawk, and biofuels are held up by forces similar to natural gas.
The long-term, multidecadal picture here is economic, not capacity based. The developed world is smart. Remember Indiana Jones stealing the gold head and swiping it with the bag of sand? That's energy capacity over the next fifty years. We will find a way to make all the something else's pay. Because we've done it before.
Yeah, he had to flee, dodging lethal booby traps. What fun would it be if it were easy? Where would the arbitrage be in that?
Will Oil price go over $100/b again? Of course.
The US is the most efficient energy consumer in the world.
However, it will be a gut wrenching move - it will cost trillions to revamp the energy infrastructure and it will take a crisis to make it happen.
Ironically the French used the 1974 crisis to justify a large scale move to nuclear power while the US did nothing. Today 80% of French electricity comes from its park of 60 nuclear reactors.
On Nov 13 05:42 PM Davewmart wrote:
> The IEA data claiming that we should have enough oil out to 2030
> has now been comprehensively analysed by Uppsala University.
> www.tsl.uu.se/uhdsg/Pu...
>
> It boils down to the IEA raising the assumed depletion rates for
> fields from historic norms without saying why, which would mean that
> more oil would be available faster than would otherwise be the case.
>
>
> Uppsala University posits similar depletion rates to those in the
> past - the least hypothesis - and comes out to total production FALLING
> from around 85mb/d today to around 75mb/d by 2030, which has profound
> implications for economic growth - it is unlikely to happen.
> In fact we will be facing falls in gross economic output, until we
> can do something to de-link from oil - as the text remarks the correlation
> between oil use and economic growth is pretty much 1:1
>
> The IEA had given oil supplies in 2030 of around 101mb/d, so from
> an increase in supply if you don't make the entirely unexplained
> leap in predicted exploitation rates, we go to a situation of absolute
> decrease of around 13%
>
> This is in the context of a population which will increase from around
> 6 billion to around 8 billion over the same time period.
>
> Putting the numbers together, that gives us a per capita oil supply
> of around 2/3rds of present supplies.
>
> Goodbye growth and all the plans on which financial planning by the
> Government, pension plans etc are based.