Best of the Week
Most Popular
1.Gold Price Trend Forecast, Where are the Gold Traders? - Bob_Loukas
2.Stocks Bear Market of 2017 Begins? Shorting the Dow At its Peak! - Nadeem_Walayat
3.Betting on President Trump Leaving Office Early, Presidency End Date - Betfair Market - Nadeem_Walayat
4.Why Stock Market Analysts Will be Wrong About 2017 - Clif_Droke
5.Is This The Best Way For Investors To Play The Electric Car Boom - OilPrice_Com
6.Silver Price 2017 Trend Forecast Update - Video - Nadeem_Walayat
7.Gold Price Set For Very Bullish 2017, Trend Forecast - Austin_Galt
8.10 Things I learned From Meetings With Trump’s Transition Team - - John_Mauldin
9.How Investors Can Profit From Trumps Military Ambitions - OilPrice_Com
10.Channel 4 War on 'Fake News', Forgets Own Alt Reality Propaganda Broadcasting - Nadeem_Walayat
Last 7 days
Stock Market Sentiment at ‘Extreme Greed’ - 26th Feb 17
Trump Relinquishes Control of Foreign Policy - 26th Feb 17
[Gratis] "Dark Money" Secrets Revealed! - 26th Feb 17
Stock Market SPX New All-time Highs Continue - 25th Feb 17
POWERFUL GOLD & SILVER COILED SPRINGS: Important Charts You Have To See - 25th Feb 17
Underperformance in Gold Stocks Argues for Interim Peak - 25th Feb 17
Watch What Happens When Silver Price Hits $26...  - 25th Feb 17
Gold Futures Buying Yet to Start - 25th Feb 17
When the Stock Market Flying Pig Tops - 24th Feb 17
Gold, Second Fed Hike and Interest Rates - 24th Feb 17
Bitcoin Price Hits Record High! - 24th Feb 17
Another Stock Market Bubble? Bring it On! - 24th Feb 17
What Investors Need To Know About U.S. Money Market Funds? - 24th Feb 17
When Was America’s Peak Wealth? - 24th Feb 17
The Oscars – Worth Their Weight in Gold? - 24th Feb 17
The Best Reasons to Buy Gold in the Age of Trump - 22nd Feb 17
Silver, The Return of Stagflation - 22nd Feb 17
Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - 22nd Feb 17
Gold: Short End US Rates Matter More Than Long End Real Yields - 22nd Feb 17
CONTINENTAL RESOURCES: Example Of What Is Horribly Wrong With The U.S. Shale Oil Industry - 22nd Feb 17
Here’s Proof Rising Rates Are Good for Gold - 21st Feb 17
Gold and Silver Weekly Update - 21st Feb 17
US Dollar and Gold Battle of the Cycles - 21st Feb 17
NSA and CIA is the Enemy of the People - 21st Feb 17
Big Moves in the World Stock Markets - Big Bases - 21st Feb 17
Stock Market Uptrend Continues - 21st Feb 17
Brent Crude Oil Price Technical Update: Low Volatility Leads to High Volatility - 20th Feb 17
Trump’s Tax System Could Spark The Wave Of Self-Employment - 20th Feb 17
Here’s How to Stay Ahead of Machines and AI - 20th Feb 17
Warning Signs Of Instability In Russia - 20th Feb 17
Warning: This Energy Investment Could Wreak Havoc On Your Portfolio - 20th Feb 17
The Mother of All Financial Bubbles will be Unimaginably Destructive when it Bursts - 19th Feb 17
Gold’s Fundamentals Strengthen - 18th Feb 17
The Flynn Fiascom, the Trump Revolution Ends in a Whimper - 18th Feb 17
Not Nearly Enough Economic Growth To Keep Growing - 18th Feb 17
SPX Stocks Bull Market Continues to make New Highs - 18th Feb 17
China Disaster to Trigger Gold Run, Trump to Appoint 5 of 7 Fed Governors - 18th Feb 17

Market Oracle FREE Newsletter

State of Global Markets 2017 - Report

Why The IEA Wants High Priced Oil

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

By: Andrew_McKillop

Commodities THE IEA' S NEWLY FASHIONABLE QUEST
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!

STAYING FASHIONABLE

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.

FASHIONABLE FOR ELITES

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.

IS GLOBAL WARMING REAL?

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

Contact: xtran9@gmail.com

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 http://www.MarketOracle.co.uk - 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