IEA provides a rosy supply of crude

The International Energy Association (IEA) released its World Energy Outlook to controversy on Nov. 10. The U.K.-based Guardian newspaper quotes IEA sources admitting the agency’s figures for future oil production were inflated because of U.S. pressure. The two separate sources within the IEA want to remain anonymous because they feared reprisals. Now why does this matter?

Put simply, future oil shortages are being downplayed. In 2005, the IEA predicted daily oil production would rise to 120 million barrels by 2030. But harsh criticism forced the agency to cut this estimate a number of times until finally, in 2008, the IEA claimed the world oil production would be 105 million barrels a day by 2030.

But the IEA sources don’t feel that even 90 million barrels a day is possible 20 years from now. And peak oil expert Colin Campbell believes that only 54 million barrels a day of production will be possible by 2030.

Why would the IEA distort its figures? The fear is that if markets knew the truth, the world price of oil would be driven higher and panic might ensue.

Collusion of Interests: In 2008, when the price of oil hit US$147 a barrel, the United States was paying $700-billion a year to import oil. The higher the price of oil, the higher the foreign payments, the larger the balance of trade payments. So the United States has a very strong, vested economic interest in keeping oil prices as low as possible.

Financial Post