The International Energy Agency is looking for 200 million barrels of oil. The crude has not been displaced, it seems. Rather, there is a 200-million-barrel gap between the agency's own global inventory calculations and what it observed in the global oil supply.
Per a Bloomberg report, the IEA had calculated that, based on certain supply and demand assumptions, global oil stocks last year should have declined by 400 million barrels. Instead, they declined by 600 million barrels.
"A retrospective view shows the difficulty over the past two years of reliably analyzing and forecasting supply and demand," the IEA said as quoted by Bloomberg. "Lessons learned will improve the work in 2022 and allow us to better understand our market."
The wrong assumptions about demand were clearly one cause for the "shortfall," but it wasn't the only one. As Bloomberg notes, the IEA tracks global oil inventories by satellite, which omits data about oil in pipelines and oil in underground storage.
Another cause for the gap is that the IEA focuses on the Organization for Economic Cooperation and Development and mostly tracks its supply. At the same time, there are many countries outside the OECD that have been building their crude oil inventories, perhaps most notably, China.
Tightening global supply has been identified by analysts as the main cause of the latest oil price rally, coupled with strong demand. This is not the first time the IEA has underestimated the strength of oil demand.
One recent example of this underestimation occurred last year when it released its Road Map to Net Zero, in which the agency called for the immediate suspension of all new oil and gas exploration. Months later, the IEA was calling for more oil and gas investments.
Earlier this month, the IEA again had to admit it had made wrong assumptions about oil demand.
"Demand dynamics are stronger than many of the market observers had thought, mainly due to the milder Omicron expectations," the head of the agency, Fatih Birol, said.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
Comments
This manifests itself in reducing the decline in global oil inventories than it actually is, deliberately underestimating global oil demand, enhancing non-OPEC production growth when hardly anything is forthcoming, hyping all the time about the potential and rise of US shale oil production and exaggerating the growth of global oil reserves and discoveries for the sole purpose of depressing oil prices. Any wonder then that the IEA virtually gets it wrong most of the time.
Examples of the IEA’s mistakes and contradictions abound. It underestimated global oil demand when it released its net zero 2050 roadmap and ended calling for more oil and gas investments.
The IEA got it wrong again when it blamed Russia for Europe’s energy crisis by claiming that it cut its gas exports to Europe by 25% when the EU Secretariat has itself acknowledged that the Russian gas giant Gazprom has fulfilled all its gas supply contracts with the EU.
The IEA claimed that renewables weren’t responsible for Europe’s energy crisis when everybody knew full well that it was the EU’s hasty acceleration of the energy transition at the expense of fossil fuels that was behind the energy crisis.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London