They were hardly quaking in Riyadh after Thursday’s stern press release from Paris. In a rare statement from its governing board, the International Energy Agency said it was “prepared to consider using all tools that are at the disposal” of its 28 members to coax more oil out of producers. Though it did not mention its nemesis by name, only the Organisation of the Petroleum Exporting Countries has spare capacity at near-record prices.
Founded after the Arab oil embargo as an “energy Nato”, the IEA’s statements might be taken more seriously if it had actual guns and bombs. Instead, the IEA is really an anti-Opec. But while the latter could long make the world quake by threatening to tighten the oil spigots, consumption is far tougher to adjust by fiat. Aside from some quite useful research reports and co-ordination of emergency stockpiles, the IEA mostly serves as a sort of sinecure for European bureaucrats. It is even less relevant than when its 16 founders started it in 1974, having added not one of the energy-guzzling Bric countries as a member.
What should concern the IEA is not how powerful Opec is amid triple-digit crude prices but how toothless. Only Saudi Arabia has meaningful excess capacity and its output boost of nearly 1m barrels a day in February after the Libyan disruptions achieved almost nothing. Refiners are generally not short of the heavy crude that was on offer.
Believe it or not, Opec movers and shakers such as Saudi oil minister Ali al-Naimi are worried, too. High prices in the 1970s sparked two recessions and lopped some 12 percentage points off Opec’s market share in a decade. Modifying the old saw, it takes high prices (and not press releases) to cure high prices.
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