The IEA’s relevance

In the video below, the International Energy Agency’s executive director Nobuo Tanaka told the FT’s Carola Hoyos that the group, which represents the energy interests of western oil-consuming countries, may be becoming less relevant as growth in energy demand shifts to emerging markets:

Some highlights follow:

It’s a very good question. Our relevance is under question. Half of already the energy consumption is in non-OECD countries. For oil, it soon happens that the majority of consumption is in non-OECD countries.

We are always asking for stock level data from China, India and the Middle East. Because stock data is a very important indication of price levels for the future. Yes, we did a very good job of analysis of stock levels and  price linkage in the past, but it’s no longer true because these economies are major players and we have still very good data in OECD but no data in non-OECD. So for the sake of transparency we need their help. And that is good for them, also. So that is one of the major meessages that we want to deliver to these countries, and [to] work closely with us. Eventually we wish they will join us, although they are already working with us closely in many ways.

On whether Opec’s role is good or bad:

Well, good or bad is a very – value judgment – it’s a very difficult thing. The answer should come from the market. But we think that certainly the Opec policy of controlling the production certainly helps offsetting the price level, and certainly this price level is of course helping the investment into the non-conv oils like oil sands or other deep sea explorations.

Yes, for the investment side, this price level is helpful. but is it helpful to the demand side, maintaining economic growth for the future? this is a big question, we still feel there is some downside risk there.

Meanwhile, as Javier Blas notes in another FT report today, Opec, while saying that $70 – $80 a barrel would be good for investment in future production for the next few years, added:

Opec cautioned that its assumptions did not reflect whether such a price development was likely or desirable. But by assuming the $70-$80 a barrel range, the group appears to be trying to anchor oil market expectations around $75, a price level which Saudi Arabia, Opec’s de facto leader, describes as “fair”.

The oil prices seen now certainly appear high enough to revive investment, at least within the oil cartel: Opec’s secretary-general told the FT before the IEF conference began that all 35 new projects that its member countries had delayed were now going ahead.

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