Cancun, Mexico, where the world's energy ministers agreed to create an open database of every nation's oil supply and demand figures. (image: bugbog.com)

Despite a dearth of media coverage, a historic event occurred on Wednesday: the International Energy Forum (IEF)’s biennial meeting produced a declaration approved by 66 nations in attendance that announced a new collaborative relationship that would lead to greater information sharing and transparency in the oil market.

The Cancun Ministerial Declaration (named after the convention’s location in Cancun, Mexico) stresses neither market regulation nor market intervention as recommended policies to combat oil price volatility, despite prior coverage that suggested these methods were under consideration. Instead, it favors a stepped-up version of what has been a project of the association since 2001: to create its own database of information on every nation’s oil demand, production, consumption, and stocks that would be constantly updated. Called the Joint Oil Data Initiative (JODI), the database was meant to parallel the International Energy Agency (IEA)’s authoritative Oil Market Report in its goals while rivaling it in quality and openness.

The successful production of this data resource would be no small achievement, and would likely lead to greater transparency in and wider understanding of oil markets. Speculation thrives on lack of information. The present lack of solid and widely-accepted information on factors like oil production figures is what allows analysts from firms like Goldman Sachs to sway the market with nebulous citations like “limits in the production and storage of commodities” in a market forecast. Because financial journalists believe that analysts have access to information they themselves do not, it’s impossible for them to analyze or verify these statements. If a publicly available and updated database of detailed supply and demand information were available, journalists, analysts, energy ministers, and traders would be able to thoroughly evaluate the validity of all statements and forecasts. Importantly, traders would also have the ability to choose what source of information to take seriously, lessening the influence that the prices of oil contracts several months into the future have on near-term investments. This could dampen the kind of excess speculation that leads to price volatility, because the artificial demand created by speculators buying up futures contracts would be more clearly visible. Instead, investors could choose to base their decisions more heavily on physical data.

As the only international energy organization that includes new consuming majors such as China, India, and Brazil as members (and therefore, as collaborators), the IEF is amidst a fast rise in its global relevance. In an interview with Financial Times Chief Energy Correspondent Carola Hoyos on the last day of the conference, IEA chief Nobuo Tanaka gave his blessings to the forum, which now will begin to rival his own organization’s as the authority on global energy data.

If the IEF succeeds in producing a high quality and openly accessible database of global oil data, oil prices would likely becomes less volatile. However, the effectiveness of this measure alone is skeptical. ”Data collection” appears to be the limit of IEF’s power. Despite wide acceptance within its ranks that excessive speculation in the New York and London commodities markets is the root of volatile oil prices over the past two years, the respective oil ministers and leaders don’t have any power to directly limit this activity. Even if sweeping numbers of traders began to adjust their investments to JODI-informed criteria, powerful speculators like Goldman Sachs, and JP Morgan would still wield significant influence on the market. Addressing this imbalance is the aim of commodities market regulation, which is the province solely of the Commodities Future Trade Commission in the US, and the Financial Services Authority in the UK, and it’s unclear whether the slow progress of the CFTC and the hands-off approach of the UK would be swayed even by a unified front of the majority of the world’s countries.

In addition to a re-energized commitment to JODI, the Cancun Declaration (pdf here) establishes the development of a more formal organization within the IEF. In its plan to expand the dialogue between producing and consuming nations, the IEF is careful to preserve the “informality” that has been critical for its past collaborative success. However, the document’s talk of a coming “IEF Charter” lends credence to the sense that privileges will be extended to those who elect to participate in the new framework. Because this is a very early stage of a new kind of agency, we will have to wait months for more details. That next soonest event will likely be the joint symposium the IEF plans to hold with OPEC and the IEA in January 2011.

Steady oil prices for the next decade is what OPEC's newest study predicts. (image: travelblog.org)

A yet-to-be released study expects oil prices to remain in the $70-80 range for the next ten years, says CNBC.

Conducted by OPEC, the report and its fuller details will become public on Tuesday and Wednesday during a presentation at the 12th International Energy Forum (IEF) conference in Cancun, Mexico. United Arab Emirates 24/7 reports that excessive speculation and the global financial crisis are factors in the report’s result.

The IEF is the world’s largest assembly of energy ministers. It holds a unique position in the energy industry because it’s committed to informal dialogue, not policy recommendations or preparation, and because it invites nations that are often excluded from global assessments of energy due to their non-OECD status. Countries such as China, Brazil and India are of an equal or superior importance to the current global energy picture than the advanced western economies, as they are poised to consume the lion’s share of the world’s energy in coming decades. Because they are not OECD members (and therefore, not International Energy Agency members), they operate outside of the kind of monitoring and international data-collection upon which the rest of the world relies.

The meeting on March 30 and 31st will include an assessment of future global oil demand. Energy ministers from over 60 countries will be in attendance, including Brazil and Russia, as well as the CEOs of oil industry heavyweights Exxon Mobil, ConocoPhillips, Royal Dutch Shell, and Total.

Khalid Al-Falih, Saudi Aramco CEO, sees room for alternative energy and the Saudi national oil company. (image: geobahrain.org)

For a man at the top of the global oil industry, the president and CEO of Saudi Aramco, Khalid Al-Falih is accepting of the rise of renewable energy, reports Aramco ExPats. “Ultimately,” he said in a speech in Korea, alternative sources of energy “will displace petroleum.” He’s not too worried, though, because “there will be attractive uses for our hydrocarbons other than burning.”

Wait, isn’t he supposed to say that renewable energy can’t replace oil? Well, Al-Falih thinks Aramco can have it both ways. Renewable energy will “ultimately” take oil’s place—“over time.” But for now, petroleum is still king, and “an essential commodity to virtually every aspect of modern life.” He’s previously conceded that believers in peak oil have a case, but that oil will last longer than they think.

He makes a good case, and leans on the IEA’s assessment that oil will be the biggest component of the global energy mix in 2030, even as global energy demand rises by 40 percent. When Al-Falih says that “global economic development” and “social advancement” depend on “making the best use of proven sources of energy” (read: oil and gas), he’s speaking in his own self-interest—but he might also be right.

Even in the hazy future when renewables dominate the energy industry, Al-Falih has plans to make sure Aramco still fares well: Petro-Rabigh, Saudi Arabia’s first crude petrochemical refinery, will manufacture plastics, a material that will continue to see use even if alternative fuels power homes and fuel vehicles.

Professor Kjell Aleklett. (image: wikipedia.org and aspo-australia.org.au)

A physicist at Sweden’s Uppsala University is taking issue with last week’s assessment of future oil supplies by the International Energy Agency (IEA), reports the Guardian.

Physics professor Kjell Aleklett at Uppsala University, one of Europe’s leading academic institutions, published a scathing review of the IEA’s annual World Energy Outlook, saying that the organization has drastically downplayed the scale of future oil shortages. He contends that the IEA’s oil supply figures have become “politicitized” and urges European governments to review global oil supplies themselves.

In its World Energy Outlook annual report, the IEA last week predicted lower oil prices due to carbon-reduction efforts. The timing of the IEA report was designed to spur leaders to come to an agreement in Copenhagen next month. Aleklett, the co-author of a new report, “The Peak of the Oil Age,” says oil production will be closer to 75m barrels a day by 2030 than the “unrealistic” 105m the IEA predicted in its report. Aleklett, who also runs a Global Energy group at Uppsala, described the IEA’s report as a “political document,” designed for consuming countries with a vested interest in low prices.

This accusation by Aleklett is the second time in a week that the IEA has come under fire for an unrealistically rosy forecast: last Thursday, a whistleblower at the agency expressed similar doubts about the way energy statistics were being collected, and added that the U.S. has been encouraging the overly-optimistic reporting to avoid a global oil panic and resulting oil grab. Other IEA insiders also suspect U.S. influence and fears of a stock market panic helped to prompt the Paris-based organization’s figures.

When the whistleblower story appeared, Aleklett said that he had similar worries about the IEA. He says that when the Organization of Economic Cooperation and Development, the 28-country council that counts on IEA as their energy advisor, gave him the task of writing a 2007 report, ‘Peak Oil and the Evolving Strategies of Oil Importing and Exporting Countries,’ it was one of a number of reports that were discussed at a round-table meeting held at the IEA. At that time, says Aleklett, he had several private conversations with IEA officials, who reported the revelations that were now being reported in the Guardian, under the promise that he not name them as sources. He said he heard the same allegations earlier from a Norwegian IEA officer, who maintained that the U.S. was pressuring the agency.

According to the Canadian Globe and Mail, Aleklett and the IEA are in agreement on the estimated oil volume in the fields yet to be discovered and developed. They sharply disagree on the productivity of these new fields, with the IEA contending that these fields will more than fill the supply gap, as the old fields are no longer usable. Alekett points to history, which has shown that the new fields, which are generally smaller, are less productive than old ones and points to the dramatic production rates from the North Sea fields, which reached their peak output in 2000, as an example. He cites the slow-to-nonexistent development of these new fields, and says that the not-yet-developed reserves in the IEA report cover 1,874 fields of various sizes that would all have to come into production in the next 20 years.

“That is something like eight fields per month coming on stream,” Alekett’s report reads. “Even if the oil exists, it is questionable whether the necessary investment needed to produce such a rapid pace of development can be achieved in timely fashion.”

A tar sands mine. (image: ran.org)

The paper also focuses particular concern upon future production rates from “unconventional” sources, such as tar sands, saying that there is a lack of information in the 2008 Outlook figures which has been repeated in the 2009 Outlook report, and adding that “we must therefore regard the IEA production figure as somewhat dubious until it is explained more fully.”

For its part, IEA has called the accusation that politics are influencing its predictions “groundless,” and that the Outlook report was reviewed by 200 independent experts. A spokeswoman from the agency said, “We would be happy to see any initiative to improve the data quality on reserves and decline rates. We believe our World Energy Outlook 2008 opened an important door to have more field data and transparency and would very much welcome similar efforts to help improve transparency in the oil sector.”

The IEA was established in 1974 after the oil crisis in an attempt to safeguard energy supplies to the West. The World Energy Outlook is produced annually under the control of the IEA’s chief economist, Fatih Birol, who has defended the projections from other outside attacks. Birol has been facing tough questions about the figures from inside the agency, say IEA sources.

Alekett’s own predictions of the global oil supply are stunning: Production in 2030 will be about 76 million barrels a day, or about one-third less than the IEA’s figure, and some 10 million less than current production. If, as seems likely, Alekett’s report and the IEA whistleblower’s allegations are correct, the coming scenario is not pretty. If oil supplies decline, prices would dramatically rise, which of course, would be passed on to consumers in the form of higher prices for fuel, diesel and heating oil, food, and pretty much everything else.