IEA Countries Better Able to Handle Oil Supply Disruptions
International Energy Agency member countries are in a better position to respond to unexpected oil supply disruptions than there were in 2000, according to a new report from the IEA. Nevertheless, numerous factors will continue to test the delicate balance of supply and demand, the IEA says in Oil Supply Security — Emergency Response of IEA Countries 2007.
When Hurricane Katrina hit the Gulf of Mexico in 2005, the region’s oil production and refining infrastructure was devastated and world energy markets were disrupted. The IEA decided in a matter of days to bring 60 million barrels of additional oil to the market. The emergency response system worked as the collective action helped to stabilize global markets.
The hurricane response and the recent reviews confirm that key advances have been achieved, particularly in terms of stockholding to support stockdraw in the event of a supply disruption, the study finds. IEA member countries’ stocks remain on an upward trend: since the last publication of the report (2000), they grew by 14% and stood at 4.1 billion barrels at the end of 2006.
Stocks grew more than just to compensate for the rise in net imports to IEA member countries; at the end of 2006, total stocks covered 122 days of net imports, compared to the all time lowest level of 108 days in early 2000.
There has also been an increase in the number of member countries holding government and/or agency (public) stocks. In 2007, 17 out of the 26 members of the IEA held public stocks. This reflects a rise in the number of member countries with stockholding agencies, which has increased from 4 to 11 since the early 1980s. With the accession of Poland and the Slovak Republic to the IEA, and with Turkey’s intention to create an agency, it is anticipated that 20 out of 28 IEA member countries will have public stocks by 2008.
In addition, an increasing proportion of all stocks held in IEA member countries is publicly controlled. In the mid-1980s, only one-quarter of all IEA member countries’ stocks were publicly held; by 2006, this figure had risen to more than one-third. The collective action of 2005 showed that public product stocks might be necessary when downstream infrastructure is severely damaged and that is why countries who traditionally hold crude oil in their in public reserves are now considering product stocks as well.
Despite the progress, numerous factors will continue to test the delicate balance of supply and demand, the IEA says. “Oil demand growth will continue to accelerate in Asia; oil will be increasingly produced by a shrinking number of countries; and capacities in the supply chain will need to expand.”
The complete report Oil Supply Security — Emergency Response of IEA Countries 2007. is available for purchase at the IEA website.
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