The International Energy Agency (IEA) was created by the 26-member Organization for Economic Cooperation and Development (OECD) to monitor and report on the world’s energy situation so that governments can plan and take appropriate actions. OECD members are industrialized nations and mostly consumers of imported energy. As a result, IEA reports are optimistic, lest they be accused of spooking the markets and driving up energy prices. For example, the IEA always projects that energy demand will rise at only half the rate of global GDP.
However, it has become obvious that oil demand is exceeding the world’s oil production capacity.
Some say this is a sign of “peak oil” and that worldwide oil production will soon begin a gradual decline, despite higher prices. The IEA has long dismissed the idea that “peak oil” is near, yet its latest “Medium-Term Oil Market Report” released on July 9, 2007, it made a startling admission: "Certainly our forecast suggests that the non-OPEC, conventional crude component of global production appears, for now, to have reached an effective plateau, rather than a peak."
While oil production has increased in some nations, this has only offset declines in others. Worldwide oil production has been stuck on a “plateau” since the beginning of this year, while increasing demand has recently caused prices to rise. Recent demand data forced the IEA to boost its annual demand growth projection from 2% a year to 2.2%. This July report notes that since oil production is not increasing, something must be done to decrease demand. Given a lack of options, “market forces” will continue to drive the price of oil higher.
The report blames the Russians for not boosting production. In past reports, the IEA assumed that inefficient and somewhat corrupt Russian state oil companies could greatly increase that nation’s oil export capacity. It also assumed that Russian leaders would overlook harsh criticism by some Western powers and invest billions of dollars in new oil fields to keep the worldwide price of oil down. Not surprisingly, Russian oil production has not risen sharply, but has declined since February.
Sanders Research Associates
