"IEA should either get the numbers right or get out of the reporting business"
World Oil, July issue
Editorial
Told you so
For the past few months, we have reported the observation that there
was something not quite right with the world petroleum supply and
demand statistics published by the International Energy Agency (IEA).
However, two of the most persuasive authorities [1,2] pointing out these
discrepancies are closely affiliated with the E&P sector, which provides
skeptics with a conflict-of-interest argument.
However, now comes a report from an impartial source, which confirms
many of the suspicions raised by our industry friends. It seems that the
GAO [3] at the request of Senator Pete Domenici (R-N.M.), looked into
the methods used by IEA to prepare its reports. While GAO didn't say
IEA had erred intentionally or that it had some hidden motive for skewing
statistics, it did point out a few areas in which IEA had no hard data for
making its projections.
For example, GAO states, "supply projections are based on IEA's analysis of (only) 400 individual oil fields and areas in the 77 oil-producing countries. Members of OPEC are not included... In its analyses, IEA's projected world oil demand exceeds the projected supply from the 77 non-OPEC countries. IEA assumes that OPEC supply and stock change will make-up the difference." GAO further concludes that, "at any point in time, the historical oil supply and demand, as well as stock data, reported by IEA could be overstated or understated by an unknown magnitude." (These are the infamous missing barrels.)
Commenting on the release of the GAO report, George Yates, chairman of the Independent Petroleum Association of America (IPAA), said, "users of IEA data need to be more cautious about the information." In particular, he cited the commodity exchanges, which need to better understand the limits of the IEA data, especially when oil markets are as turbulent as they were in early 1998. Yates also suggested that IEA and other agencies "improve data reporting, resolve anomalies and develop more reliable instruments."
From our perspective, comments from GAO and Yates seemed overly polite. Considering the importance accorded IEA figures in the world oil markets, something more direct seems appropriate, such as: "IEA's half-baked analyses and outright guesses are causing unnecessary disruptions in the commodity markets. They should either get the numbers right or get out of the reporting business."
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1. Simmons, M. R., "Crude oil prices: A year of infamy," World Oil, Feb. 1999, p. 28.
2. Littell, G. S., "World crude production: Bad statistics produce poor conclusions," World Oil, June 1999, p. 69.
3. The General Accounting Office (GAO) is the investigative arm of Congress. Charged with examining matters relating to receipt and disbursement of public funds, GAO performs audits and evaluations of government programs and activities. |
