Best of the Week
Most Popular
1.Stock Market Crash and Recession Indicator Warning: Extreme Danger Ahead - Harry_Dent
2. Is This How World War III Begins, In Almost Complete Silence? - Jeff_Berwick
3.Trump Wins 2nd Presidential Debate, Betfair Betting Markets Odds Bounce - Nadeem_Walayat
4.Why Krugman, Roubini, Rogoff And Buffett Dislike Gold - GoldCore
5.End of SPX Stock Market Correction Nears - Tony_Caldaro
6.Get Ready for the Future - Exponential Machine Intelligence Mega-trend towards Singularity - Nadeem_Walayat
7.US Housing Market Bubble II – It’s Happening Again! - Andy_Sutton
8.FTSE BrExit Stock Market Panic Crash Resolves towards New All Time Highs - Nadeem_Walayat
9.Can Trump Still Win Despite Opinion Polls, Bookmakers and Pundits all Saying Hillary has Won? - Nadeem_Walayat
10.Gold’s, Miners’ Stops Run - Zeal_LLC
Last 7 days
Inflation About To Explode Higher - 22nd Oct 16
Still waiting for SPX uptrend to kick off - 22nd Oct 16
Will a Rising US Dollar Crush Gold’s Fledgling Bull? - 22nd Oct 16
Why The Global Economy Will Disintegrate Rapidly Back to Olduvai Gorge - 22nd Oct 16
GLD Bleeds Out; Weekly Gold Update - 22nd Oct 16
Stock Market Investment Success Through the “Investment Rule of 72” - 21st Oct 16
The Final Bottom in Gold - WHEN - 21st Oct 16
Gold Green Lights Upleg - 21st Oct 16
Demand for US Mints Silver Eagles has ‘Returned with a Vengeance’ - 21st Oct 16
Central Bankers Can't Stop The Death Blow Of The Post US Election Recession - 21st Oct 16
The Fortune at the Bottom of the Pyramid: Golden Opportunity for Frontier Asia - 21st Oct 16
Have You Taken These 4 Simple Steps to Improve Your Trading? - 21st Oct 16
The Stock Market is an Accident Waiting to Happen - 20th Oct 16
It's Rally Time for Gold and Silver Equities - 20th Oct 16
Cashless Society – Risks Posed By The War On Cash - 20th Oct 16
China's insane Housing Market Will Tumble and Crash in 2017 - 20th Oct 16
Donald Trump Bounces Going into 3rd and Final US Presidential Election Debate - 20th Oct 16
Attention Please: Phase Two of the Gold and Silver Train Now leaving the Station. All Aboard? - 19th Oct 16
How to Successfully Trade a Stock Market Crash - Black Monday October 19th 1987 - 19th Oct 16
Tesla, Apple and Uber Push Lithium Prices Even Higher - 18th Oct 16
Silver, Debt, and Deficits – From an Election Year Perspective - 18th Oct 16
UK Property Market: Slow Growth Does Not Equate To Decline - 18th Oct 16
Trump Election Victory is in Your Power - 18th Oct 16
Stock Market More to Come! - 18th Oct 16
This Past Week in Gold and Silver - 17th Oct 16
A Falling Stock Market Cannot Be Allowed - Financial Repression Is Now “In-Play”! - 17th Oct 16
Commodities, Forex and Stock Market Trend Forecasts - 17th Oct 16
Stock Market Crash..or No Crash? - 17th Oct 16
A perspective on risk rally – Risks abound but Stock Market is Confident - 17th Oct 16
Bank of England Blames Brexit for Sterling Drop Inflation, Masks QE Money Printing Cause - 17th Oct 16
From Piety to Pride to Pity, America's Racial Divide - 17th Oct 16
Is Obama Juicing US Government Spending To Get Hillary Clinton Elected? - 16th Oct 16
Seek Your Independence: Anything Else Will Destroy You - 16th Oct 16
SNL - US Presidential Debates, 1st, 2nd, VP - Like You've Never Seen them Before! - 16th Oct 16
End of Economic Growth Sparks Wide Discontent - 16th Oct 16
Donald Trump on Life Support, May Abandon Election Campaign and War on Republican Party - 15th Oct 16
The Gold Manipulators Not Only Will Be Punished, They Have Been Punished - 15th Oct 16
Black Votes Matter - Is the US on the Verge of Mass Race Riots? - 15th Oct 16
Gold Stocks Screaming Buy - 14th Oct 16
Brace Yourself for the Quadrillion-Dollar Reckoning - 14th Oct 16
The Next Recession Will Blow Out the Budget - 14th Oct 16
John Mauldin: My Infrastructure Plan to Save the US Economy - 14th Oct 16
World War III On The Brink: War Will Continue Until It Triggers Economic Collapse - 14th Oct 16
US T-Bill Rejection At Ports In Progress - 14th Oct 16
These 2 Debt Instruments Pose Peril to Millions of Investors - 14th Oct 16
China’s Rocketing Housing Market Real Estate Bubble - 14th Oct 16
DIY Winter Home Maintenance Money Saving 22 Point Checklist to Get Ready for Winter/Fall - 14th Oct 16
US Stock Market, Big Picture View - 13th Oct 16
Stock Buybacks Main Force Driving Bull Market; Rewards Investors and Starves Innovation - 13th Oct 16
SPX Gapping Down... - 13th Oct 16
Syria - Obama Stepped Back From Brink, Will Hillary? - 13th Oct 16
The Structure and Future of Gold in the Investment and Monetary World - 13th Oct 16
Can Trump Still Win Despite Opinion Polls, Bookmakers and Pundits all Saying Hillary has Won? - 12th Oct 16
Gold and Crude Oil - General Stock Market Links - 12th Oct 16
Samsung's Galaxy Battery Just The Tip Of The Iceberg - 12th Oct 16
Hillary: Deceit, Debt, Delusions (Part Two) - 12th Oct 16
Gold and Silver Metals Show Strength Relative to the USD Index - 12th Oct 16
Announcing Trader Education Week -- a Free Event to Help You Learn to Spot Trading Opportunities - 12th Oct 16
Confirmed Stock Market Sell Signals - 11th Oct 16
Hillary Deceit, Debt, Delusions - 11th Oct 16
Trump Support Crashes to New Low of 6.4 on Betfair Odds Betting Market - 11th Oct 16
The World Is Turning Dangerously Insular - 11th Oct 16
An American Tragedy: Trump Won Big - 11th Oct 16

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

LEARN to Trade

Why The IEA Wants High Priced Oil

Commodities / Crude Oil Feb 06, 2013 - 02:38 PM GMT

By: Andrew_McKillop

Claiming his views "are not very fashionable", the Turkish-born chief economist of the IEA, Fatih Birol, also describes the IEA's annual flagship reports the World Energy Outlook as "designed and directed" by himself - and his WEO is obliged to reflect "unfashionable" theories and goals.

These new theories and goals are: universal energy supplies for all, and massive worldwide response to the crisis of global warming. Reconciling these two themes or memes needs high priced oil. Regarding the market price for oil, the IEA pitches for $175 per barrel; concerning new energy taxes in the form of carbon taxes "to fight global warming", taxes of $500 per tonne of CO2 on all fossil energy, possibly by 2020 or shortly after, are no problem for Fatih Birol.

This can be finely calculated as a per-barrel tax, using the official IEA conversion base of 0.70555 kilograms of CO2 per kiloWatthour of fossil fuel energy produced, and 430 kilograms of CO2 emitted per barrel of oil. At $500 per tonne CO2, this is the tax to be levied on every 2.325 barrels consumed.

Adding the market price to the carbon tax on every barrel, we could look back to the days of $100 per barrel as the good old days of really bargain basement priced oil!


The IEA describes itself in each issue of the WEO as an "autonomous agency established in November 1974" with its primary mandate being two-fold: to promote oil supply security amongst its now-28 exclusively OECD member countries through "collective response to physical disruptions in oil supply"; and to provide "authoritative research and analysis on ways to ensure reliable, affordable and clean energy" for its member countries. 

Certainly the straight majority of IEA member countries today, including nearly all European countries, Japan, South Korea, Ausralia and others, have high priced energy, and extreme priced oil, at least in "old time economic thinking". In these countries the price of a car tank-full of fuel is close to $100. The petrol pump forecourt filling price is close to or above $350 per barrel. For Fatih Birol, however, this is cheap energy given the intensity and danger of runaway global warming.

Whether this fuel is "clean", or not, is contested by the World Health Organization's cancer research institute which most recently in June 2012 intensified its warnings on the causal link between diesel fuel and several types of cancer. It suggested a probable annual diesel cancer death toll in IEA member countries, mainly of working age persons, running as high as 150 000 - 200 000. Actuarial data on insurance coverage for Burial, Loss of Life and Annuities can give you the economic cost of this.

The theme of Diesel = Cancer of course figures nowhere in Fatih Birol's new look World Energy Outlooks  They have a much more urgent task: fighting the spectre of climate apocalypse "before the end of the century".

Times have certainly changed. Taking a quick flashback to November 1974, in the wake of the Arab oil embargo, we find the founding fathers of the IEA, Richard Nixon and Henry Kissinger, setting their future energy security agency as a second-best to what they really wanted to do. Invade and occupy Saudi Arabia to restore the free flow of cheap oil. Their IEA was a conflict-based entity created to confront Arab oil exporters intent on what Nixon and Kissinger said was their real agenda - ruining the economy of the richer nations by driving up the price of oil, or witholding supplies of oil, which is basically the same thing. 

Why Nixon and Kissinger, and everybody else in the big oil consumer countries saw red was simple: before the 1973-1974 Arab oil embargo, the barrel price was fixed at around $1.50 per barrel.


Fatih Birol's  WEO is nothing but "fashionable", for certain elites who now seek and want the highest possible price for oil, and in fact any kind of energy, after they add their tax take. To be sure the WEO is obliged to say the global energy map is changing because of the massive growth of US shale oil and gas production and may be further reshaped by a retreat from nuclear power in several OECD countries, the fast growth in the use of wind and solar technologies. and just as surely by the ongoing explosive rate of global shale gas and stranded gas discoveries, and linked LNG development.

But after that, the WEO claims it has proof that the world is still failing to put the global energy system "onto a more sustainable path". This concerns the elite-fashionable obsession with global warming (called climate change) and holding the growth of CO2 concentrations in the atmosphere to a limit of 450 ppm (parts per million). We can note that for more than 3 years, each annual edition of the WEO states that the IEA is convinced it is either impossible, or at best extremely unlikely we can limit the growth of CO2 in the atmosphere to 450 ppm by about 2045. If we wanted to do that, and tried, we would still not be able to do it.

Freshly re-elected Barack Obama, and vice president Biden have lost no time in saying they are personally convinced global warming from human CO2 emissions is real, and is a grave problem. More prosaically, the search by Obama and by lookalike - talkalike leaders, most recently France's Francois Hollande, for a quick way to raise tax revenues has refocused elite thinking towards the attractive ease of a levying new energy taxes "to save the climate".  In the US case, this would garner a hoped-for $100 billion in its first year of operation.

Despite oil's present extreme high price (in old time economic terms), which is completely unrelated to supply/demand fundamentals, oil will be a sure target for tax hikes.

The WEO talks its way through this challenge for spin doctors by firstly saying it wants  "affordable" energy for everybody, but its obsession with the 450 ppm CO2 limit means the IEA is obliged, "unfashionably" of course, to militate for high energy taxes whenever and wherever they can have the adjective "carbon" attached.

 For the IEA, "the 450 ppm limit" equates to a 2 degrees C rise in temperatures above the 1800-1960 average by 2045, although it feels free to change the goalposts and reference dates for world average temperatures, whenever it wants. This quest as "vital and obligatory", allowing rather little room for discussion on whether or not global warming is real!

Showing his deeply intellectual concern for global climate stability, Fatih Birol's WEO drips with fashionable pessimism on whether the "fight against global warming" will be won. Iin the most recent 2012 edition, the WEO presents its "450 Scenario", shorthand for preventing CO2 levels exceeding 450 ppm by or before 2045. It finds that "nearly four-fifths of the CO2 emissions allowable by 2035 are already locked-in by existing power plants, factories, buildings, etc".

This motivates its claim that much more intense, possibly harsh, rapid, and "unfashionable" action to reduce CO2 emissions must be taken before 2017, the date at which the IEA forecasts that "all allowable CO2 emissions" would be locked-in by existing energy infrastructures and systems.

High energy taxes (called "carbon taxes") are an inevitable and obligatory part of the IEA wishlist.


The IEA keywords are "allowable emissions". Its voluntarily alarmist line on CO2 emissions is certainly fashionable to the IPCC and FCCC, the present "UN-related" but not UN-status climate change entities, whose current low-profile will surely change, if and when the global warming fear campaign is relaunched by OECD leaders and instantly given wall-to-wall media cover. Both the "UN-related" climate change entities are currently locked into dispute with the UN concerning their diplomatic and legal status: if they do not obtain full, ironclad UN status, both can be legally pursued for lying, which helps explain their present low profile.

The keywords "allowable emissions" are used everywhere in IEA publications. This concept of "allowable" emissions on a global basis is directly obtained from IPCC reports, studies and advocacy over the years since the IPCC was founded in 1988. These greenhouse gas emissions limits, we can note, do not include global emissions of CO2 and CH4 (methane) from gas flaring, venting and leakage from oil and gas production, gas pipeline and LNG transport; they do not include global coalmine CH4 emissions (roughly estimated at several billion tons CO2 equivalent, per year); they do not count agricultural CO2 and GHG emissions; they also depreciate or ignore human-related CO2 release from peat bog and wetland drainage, and from methane hydrate evaporation and leakage, the combined total amounts of which are probably very large.

 The IPCC in particular makes a point of massively underestimating natural non-human emissions of CO2, and to a lesser extent natural emissions of CH4, and a long list of the other GHG, especially sulphur oxides. The margin of error in estimating terrestrial, oceanic, atmospheric, biospheric and lithospheric carbon inventories most surely exceeds tens of trillions of tons, not billions of tons, the equivalent of centuries, possibly 700 years of human emissions at the current rate of around 30 bn tons per year.

 The IPCC brushes aside any and all talk of anthropogenic climate change - as distinct from anthropogenic global warming - due to deforestation, agriculture, urbanization and other land use mega changes. The IPCC also has no time for climate change due to Earth orbital variations, solar intensity variation, cosmic radiation and other "unfashionable" causes of climate change.

The only common denominator of these "unfriendly and unwanted candidates", for the elites, is they do not have easily identified, easily measured - and easily taxed - upstream energy sector linkage.

By Andrew McKillop


Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2013 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisor.

Andrew McKillop Archive

© 2005-2016 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife