The IEA Just Blinked

Today it was reported in a Reuters article that the OECD’s International Energy Agency:

"Despite four years of high oil prices, this report sees increasing market tightness beyond 2010," the IEA said.
"It is possible that the supply crunch could be deferred -- but not by much."

The IEA's previous Medium-Term report called for world demand growth of two percent a year between 2006 and 2011. It now expects global demand to reach 95.8 million barrels per day (bpd) from 86.1 million bpd in 2007. The forecast assumes average global GDP growth of 4.5 percent annually.

"The results of our analysis are quite strong," said Lawrence Eagles, head of the IEA's Oil Industry and Markets Division. "Something needs to happen."

"Either we need to have more supplies coming on stream or we need to have lower demand growth."

"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," the report said. – from the Reuters article on Yahoo, MSNBC, and everywhere else on the web, July 8, 2007

Like I said, the IEA just blinked. Still can’t quite go with the term “Peak Oil” - they like the semantically pleasing “Plateau Oil” better. But I ask you: What’s the difference? Are they suggesting that while the world cannot increase its production, it can maintain production exactly where it is, 310 Billion Barrels per decade or about twice what might turn out to be the total reserves of Saudi Arabia, indefinitely?

Still, this is quite a move for the IEA, who just last year said that they foresaw no constraints in the uninterrupted growth in oil production through at least 2030.

Here is the clincher: Within moments of the story breaking, the price of the average oil company equity on the New York Stock Exchange rose about 1%. Just look at a graph of today’s trading in XLE or IGE, 2 large exchange traded funds of the oil producers. That can only mean that the millions of people that trade in the space know about this issue and acted on the information to the tune of 10’s of billions of dollars in market capitalization. This is not the only means by which they will take action to either protect themselves or take advantage of perceived opportunities. For all of OPEC’s lies, big oil’s obfuscations, CERA’s manipulations, and the government’s ignorance or unwillingness, the issue is CLEARLY understood by millions of investors – and for better or worse, they are the people that count.

This can be spun no other way. Not only did the IEA blink, they just called OPEC’s bluff: Produce the oil, now, if you can.

Let me translate this even more clearly: OPEC - Put up or shut up

Yours for a better world,

Mentatt (at) yahoo (dot) com