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Raymond J. Learsy

Raymond J. Learsy

Posted: August 16, 2009 04:10 PM

The International Energy Agency Shills For OPEC, The Oil Speculators and the Peak Oil Pranksters

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When it comes to matters oil and energy, the globby hand of oil influence seems to smear all in the industry, even those whose mandate is to look after the interests of consumers and national economies. And that now pertains to the otherwise-esteemed International Energy Agency (IEA).

The IEA is an energy forum of 28 industrialized nations committed to taking joint measures to meet oil supply emergencies, to co-ordinate their policies to insure energy security, as well as maintaining emergency oil stocks. They are further mandated to operate a "permanent information system on the international oil market." And here lies the rub. Information that is fully objective, or weighted toward given interests?

Consider the following. Back in June Nobou Tanaka, the Executive Director of the IEA, the agency that according to its own house literature is meant to "promote free markets in order to foster economic growth," went out of his way to pay tribute to that icon of free markets, the Organization 0f Petroleum Exporting Countries (OPEC), complimenting them for keeping their oil output "steady," after OPEC had made clear their intent at reaching an oil price objective of $75/80 bbl. He permitted himself to make this comment of outrageous obsequiousness, "Our message to OPEC is they made a sound decision." Of course, no mention of the near 4.5 million barrels of oil production capacity being shut in by Saudi Arabia alone, not to speak of the rest of OPEC. Free markets, yes, if ever higher oil prices is your goal.

Then, lending their prestige to one of the great misnomers of the oil market: that speculation has little to do with oil prices. This after the Commodity Futures Trading Commission announced that they would be issuing a report that speculators played a significant role in driving wild swings in oil prices, explaining that previous conclusions, pinning the price swings primarily on "supply and demand" had been based on "deeply flawed data." And then the joint communiqué of none less than Prime Minister Gordon Brown and President Nicolas Sarkozy calling for "transparency and supervision in the oil futures market in order to reduce damaging speculation."

Yet the good souls at the IEA know better. As reported in the Financial Times ("IEA warning over oil trade rules distortion," 08.13.09) that, "The watchdog, using guarded language also cautioned against capping speculators' abilities to trade commodities such as crude oil and natural gas, repeating its view that the relationship between speculators and oil prices was 'not significant.'" Here was a position that certainly elicited "bow-wows" of praise from Moscow to Riyadh, to Tripoli and Caracas (and are those the guys and gals from Houston and Nome, Alaska waving their hands, happy to join in?).

Then, of course, there is the chicken-little pronouncements of Fatih Birol, the Chief Economist of the IEA, who garnered much press recently by rehashing the depletion theories of that star peak oil prankster Matt ($500/bbl oil) Simmons. Thereby aligning himself with such soothsayers as Sam Kier's Pennsylvania "Rock Oil" of 1855. The U.S. Geological Survey of 1885 predicting California having "little or no chance" of finding oil. The California Kern Field written off as depleted in 1942 with forecast of 44 million barrels remaining, only to produce 10 times that amount since, with another 970 million/bbls to go. On to 1914 when the U.S Bureau of Mines assessed America's supply of oil to be adequate for only ten more years, and then upping the rhetoric two years later, predicting "a crisis of the first magnitude." Continuing to the forecast of the prestigious Club of Rome in 1972, predicting the world would run out of crude by 1990. And the myriad others echoing the same theme, too many to mention.

Thus Birol, once more stirring the peak oil pot with hardly a mention that along with depletion has come a vast increase in accessible oil and gas due to new exploration techniques, spectacular advances in secondary and tertiary recovery, with reserves of natural gas in the United States alone having increased by almost a factor of five in the last half dozen years because of new drilling techniques accessing shale gas deposits, while proven oil reserves, according to BP, are some 25 percent higher than they were 10 years ago.

Of course, bringing the imprimatur of the IEA to his theories gives Birol a semblance of authenticity. And this at a time when the world is literally awash in oil, a good time for the industry to pull the peak oil theorists out of the woodwork in the hope of countering decreasing demand by interjecting a fluctuating state of alarm over the supply of oil since looming shortages are invariably invoked to justify ever higher prices. Under the circumstances, could it just be coincidence that Mr. Birol spent six years working in the Secretariat of the Organization of Oil Exporting Countries before joining the IEA?